IAS23

Question 1

What is the financial accounting standard IAS 23 for?

Answer 1

Borrowing Costs

Question 2

What are borrowing costs defined as?

Answer 2

An expense or necessary cost in bringing a non-current asset to its present location and condition

Question 3

What is a qualifying asset?

Answer 3

An asset that takes a period of time to get ready for its intended use or sale

Question 4

Borrowing costs would have been avoided if the the asset was not created, what are the two other rules IAS 23 states?

Answer 4

1) Must be probable that the costs will result in future economic benefits
2) Costs can be reliably measured

Question 5

When does the capitalisation of costs begin?

Answer 5

When expenditures for assets and borrowing costs are being incurred, activities are necessary for the preparation of the asset

Question 6

When will capitalisation of the borrowing costs cease?

Answer 6

When the asset is substantially complete OR when no work is being carried out for an extended period of time

Question 7

How to calculate the amount to be capitalised?

Answer 7

Asset cost x capitalisation rate

Question 8

What do you put in the disclosure notes?

Answer 8

• amount of borrowing costs capitalised

- capitalisation rate used to determine borrowing costs eligible for capitalisation