Originally Posted by
blackcap
I had a chat to the CFO at PAZ and he clarified the Capitalised interest piece. Apparently it is a requirement under NZ IAS 23, where it says: An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
What that has done is artificially inflate profit by $700k and.
To the credit of the company, the CFO did concede this and also he himself was a bit miffed at the standard and to how it applies. It really makes no sense. It also means, further down the track is will come off the P and L at some stage.
I also talked to him about the high levels of debt. He said it was a strategy decision, and debt was obviously required to complete what they wanted to complete. High risk possibly but high reward if it succeeds.