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Practical case

Practical caseIAS 23L3 · Advanced

Construction site: start, extended interruption, temporary delays and end of inclusion

5 documents9 tasks≈ 85 min
0 / 14 items completed
Standards
IAS 23 — Borrowing Costs
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Constructions Aubrac SA (fictitious entity) builds a plant and its office annex, financed by a specific loan of 3,000,000 EUR at 6% per year (15,000 EUR per month), drawn on 1 February 20X5. Year end 30 November 20X5. The site experiences a three-month interruption, a rain delay and a staggered completion.

Your assignment

Assess the start of inclusion, the interruption from June to August and the delay in October, then the end date and the situation of the annex; identify the missing information; compute the eligible expenditure and the inclusion period; record the borrowing costs by phase and the placing in service (case data); present the effect; conclude.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

5 documents: open each one to read it.

Document 1Table

Loan statement by phase

Loan statement by phase (15,000 EUR per month): 1 February to 31 May (4 months): 60,000 EUR; 1 June to 31 August (3 months): 45,000 EUR; 1 September to 30 November (3 months): 45,000 EUR.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Borrowing costs of the first phase (February to May)€60,000.00
Borrowing costs of the suspension (June to August)€45,000.00
Borrowing costs of the second phase (September to November)€45,000.00
Duration from the start to the end of inclusion10 months
Duration of the extended suspension3 months
Cash paid on the asset€2,600,000.00
Materials taken from inventories€150,000.00
Interest-bearing liabilities to the contractor€250,000.00
Non-interest-bearing trade payables€180,000.00
Cumulative cost of the asset under construction at completion€3,105,000.00
Cleaning contract 20X6€14,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort5

  • Loan statement by phase

  • Site log

  • Expenditure on the asset

  • Ledger extract

  • Cleaning contract

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      9 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Are the conditions for the start of inclusion met on 1 February 20X5?

      2. Task 2Professional judgement

        Do the interruption from June to August and the delay in October suspend inclusion? Justify.

      3. Task 3Professional judgement

        On what date does inclusion end and what about the annex completed on 31 October? Justify.

      4. Task 4Missing information

        What information is missing to retain the suspension?

      5. Task 5Calculation

        Compute the eligible expenditure.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the eligible expenditure.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Calculation

        Compute the inclusion period.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the inclusion period.

        1. months

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Journal entries

        Record the borrowing costs by phase and the placing in service.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Journal entry · Journal entries

        Entry 2 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 3 · Journal entry · Journal entries

        Entry 3 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        Part 4 · Journal entry · Journal entries

        Entry 4 of 4

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      8. Task 8Effects on the financial statements

        What is their effect on the financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      9. Task 9Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 14).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 23 §17
      • IAS 23 §20
      • IAS 23 §21
      • IAS 23 §22
      • IAS 23 §23
      • IAS 23 §24
      • IAS 23 §25