Modern features of accounting for borrowing costs

Accounting for borrowing costs is undoubtedly relevant for many modern organizations. It should be noted that from this year a new federal public finance accounting standard (FAS PF) “Borrowing costs” came into force. This standard establishes updated accounting rules for borrowing costs for state (municipal) budgetary and autonomous institutions (including healthcare institutions). These rules are analyzed in this article. The research methods were analysis and synthesis, grouping method, comparison, analogy method, logical approach, systemic approach. On the basis of the research carried out, the article systematizes the types and definitions of borrowing costs provided for by the above-named federal standard. As a result, the author presents a categorical apparatus in the indicated area. In addition, the article analyzes the most important features of accounting for borrowing costs and provides examples that explain these features. The results of the study can be useful to a wide range of readers interested in the problems of modern accounting, including accounting for borrowing costs of state (municipal) budgetary and autonomous institutions (in particular, healthcare institutions), and can also be applied in the practical work of the accounting departments of these institutions and in higher education process.

Africa’s ‘hidden debt’ may increase borrowing costs

Newly released data suggest African countries have underreported debt to China worth some USD40bn

International Spillovers and Local Credit Cycles

This paper studies the transmission of the Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over 2003–13. We use administrative data covering the universe of corporate credit transactions matched to bank balance sheets to document four facts: (1) an easing in global financial conditions leads to lower borrowing costs and an increase in local lending; (2) domestic banks more exposed to international capital markets transmit the GFC locally; (3) the fall in local currency borrowing costs is larger than foreign currency borrowing costs due to the comovement of the uncovered interest rate parity (UIP) premium with the GFC over time; (4) data on posted collateral for new loan issuances show that collateral constraints do not relax during the boom phase of the GFC.

Real earnings management and borrowing costs: The moderating effect of the directors’ and officers' liability insurance

The purpose of this paper is to investigate the effects of real earnings management on firm borrowing cost of public-listed in Taiwanese manufacturing industry during 2010 to 2017, and also examines the moderating effect of the directors’ and officers’ liability insurance (D&O insurance) on real earnings management and borrowing costs. The empirical results show that borrowing cost is positively related to real earning management but negatively related to D&O insurance purchase. Therefore, the firms with D&O insurance than those without have lower borrowing costs, but the higher the D&O insurance amount, the higher the borrowing costs. Furthermore, D&O insurance has a moderating effect between the real earnings management and borrowing costs. Our findings suggest the relationship between D&O insurance and real earning management, which through the D&O insurance purchasing decision to impact on corporate borrowing costs. JEL classification numbers: G22, G32, M41. Keywords: Real earnings management, Directors’ and officers' liability insurance, Borrowing costs, Moderating effect.

Interest Limitation Rule Under ATAD: Case of the Czech Republic

The anti-tax avoidance directive (ATAD) implemented in the EU countries in 2019 has brought, among other things, a common rule for tax-deductibility of exceeding borrowing costs of corporate taxpayers – the interest limitation rule. For interest limitation, the Czech Republic had so far used the so-called safe haven thin capitalisation rule. With the implementation of ATAD, companies need to test not only the thin capitalisation rule but also the new interest limitation rule according to ATAD. This paper aims to review the impact of the new interest limitation rule on the 200 largest Czech companies by their 2017 revenue as recorded in the Albertina database. Results covering the new rules, i.e. following the ATAD implementation, are being compared to the situation before the implementation. Most of the analysed companies seem unaffected by the new interest limitation rule. The analysis also showed that most of the analysed companies do not imply exceeding borrowing costs, either before or following the ATAD implementation.

The Dollar and Corporate Borrowing Costs

We show that U.S. dollar movements affect syndicated loan terms for U.S. borrowers, even for those without trade exposure. We identify the effect of dollar movements using spread and loan amount adjustments during the syndication process. Using this high-frequency, within loan variation, we find that a one standard deviation increase in the dollar index increases spreads by up to 15 basis points and reduces loan amounts and underpricing by up to 2 percent and 7 basis points, respectively. These effects are concentrated in dollar appreciations. Our results suggest that global factors reflected in the dollar affect U.S. borrowing costs.

The impact of the ECB’s monetary policy on corporate borrowing costs

This paper examines the impact of the ECB’s monetary policy on corporate borrowing costs. We use an event study method to assess and compare the effects of both conventional and unconventional monetary policy on Germany and French corporate bond market (credit spreads). The sample of our research consists of daily data collected during the period from 04 January 1999 to 27 February 2015. This period spans the pre-crisis which begins when the ECB has launched the Economic and Monetary Union (EMU) and became responsible for the monetary policy in the euro area. We find significantly negative relation between conventional surprise and corporate credit spreads. Moreover, we find that a raise in German non-financial credit spreads and French credit spreads domestic in response to the SMP announcement. The OMT lowers the German non-financial credit spreads, while it raises German bank credit spreads and French corporate credit spreads both domestic and bund for two sectors. Finally, the LTROs are associated with a raise in corporate credit spreads. Our findings are confirmed in robustness checks by changing the non-standard monetary policy announcements with monetary policy event dummies used as one variable.