- 8 Marks
FR – May 2019 – L2 – Q6a – Accounting for Government Grants (IAS 20)
Discussion of the conditions for capitalizing borrowing costs under IAS 23 and guidelines on commencement, suspension, and cessation of capitalization.
Question
A company might incur significant interest cost if it has to raise a loan to finance the purchase or construction of an asset. IAS 23 on borrowing costs defines borrowing costs and sets out guidance on the circumstances under which such interest is to be capitalized as part of the cost of qualifying assets.
Required:
Discuss the conditions that must be met in order to capitalize borrowing costs under IAS 23, setting out when capitalization of the borrowing costs should commence, be suspended, or cease.
Find Related Questions by Tags, levels, etc.
- Tags: Borrowing Costs, Capitalization, IAS 23, Interest Costs, Qualifying Assets
- Level: Level 2
- Topic: Accounting for Government Grants
- Series: MAY 2019
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