Question

Should late payment charges paid be considered as finance charge...
The service was rendered in month 1 and recognised in OPEX in month 1.  Payment should be made in month 3, but it was paid in month 5.   The vendor thus charged late payment fees..... Should this go to Finance charges or OPEX to increase cost of service initially recognized.

Answer 1

You can use either of the two based on management judgement. I would prefer it to be on operating expenses. But one can argue that not paying supplier on time is sort of working capital financing method and such charges should go to finance expenses.

But what is more important is to follow the same rule on the similar expenses.