PNG Ports Corporation Ltd took out loans of K150 million from Westpac and ANZ banks without following any set policy, according to the Auditor-General’s Report for 2016.
Auditor-General Philip Nauga said that as at Dec 31, 2015, the company had loans amounting to K129,454,043 outstanding to Westpac and K3,803,293 due to ANZ.
These loans had been taken out to fund both operations and capital assets or qualifying assets:
- K100 million loan used to refinance BSP loans; and,
- K50 million used to finance Kimbe Port and other operations.
“The company has no accounting policy manual on the application of IAS (International Accounting Standards) 23,” Nauga said.
“In 2015, no borrowing cost was capitalised as part of asset cost.
“IAS 23, borrowing costs, addresses accounting for borrowing costs.
“It considers whether borrowing costs should be capitalised as part of cost of the assets or expensed in profit or loss.
“Without written accounting policy, management might overlook this accounting standard.”
Nauga suggested that PNGPCL management should establish a formal accounting and policy manual under property, plant and equipment, specifically addressing the capitalisation of borrowing costs.
“The objective of the policy is to prescribe the company’s accounting treatment for the capitalisation of borrowing costs associated with qualifying assets of property, plant and equipment,” he said.
“Additionally, guidance is provided on how to determine what falls into the qualifying asset category.
“Management responded: ‘In the absence of accounting manual, international accounting standards apply. This will be addressed in the accounting manual that will be developed in 2017’.”