IAS 23Workpapers (Step 4 of 5)

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Step 4 of 5

WorkpaperIAS 23 — Borrowing CostsL1 · L2 · L3

Specific borrowing inclusion file

3 missions9 sections to document50 min

Prepared by: AI-assisted draft
Reviewed by: Not reviewed — human review required
Status: Published

Objective of the workpaper

For each borrowing (one instance per borrowing), describe the loan and the asset, state whether a qualifying asset exists, enter the principal, the rate for the period (annual effective rate multiplied by the fraction of the period) and the unspent funds temporarily invested, then compute the actual costs, the investment income, the eligible costs and the costs to be expensed. The effective rate is a datum of the file (the effective interest method of IFRS 9 is not covered here).

9 sections · 21 blocks · 4 calculations · 3 entries

IAS 23 §6
IAS 23 §7
IAS 23 §8
IAS 23 §12

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

3 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity

Five assets: qualifying or not, interest expensed or included

Case tasks documented here

Compute the actual borrowing costs of asset 5.
Compute the borrowing costs of asset 5 to be expensed.
Record the borrowing costs of asset 5.

Inputs

Loan and asset: nature, terms, drawdowns and use of funds
Text
EMPRUNT_FINANCANT_UNE_MACHINE_PRETE_A_L_EMPLOI
Principal borrowed for the asset
Number
400,000
Rate for the period (annual effective rate × fraction of period, case data)
Number
5 %
Borrowed funds not yet spent (average for the period)
Number
Investment rate for the period (annual rate × fraction of period)
Number
Borrowing costs incurred over the whole period (loan schedule)
Number
20,000
Borrowing costs included in the asset (before investment income)
Number
0

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Points reviewed: qualifying asset, components, inclusion or expense, investment income
ChecklistRequired
- Qualifying asset character assessed
- Components of borrowing costs identified
- Inclusion or expense decided for the period
- Investment income deducted
- Link with the cost of a qualifying inventory checked

Calculations

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Actual borrowing costs of the period = principal × rate for the period
Calculation
20,000
Principal borrowed for the asset ; Rate for the period (annual effective rate × fraction of period, case data)
Investment income on temporary investment = unspent funds × investment rate
Calculation
Borrowed funds not yet spent (average for the period) ; Investment rate for the period (annual rate × fraction of period)
Eligible costs = actual costs − investment income
Calculation
20,000
Actual borrowing costs of the period = principal × rate for the period ; − Investment income on temporary investment = unspent funds × investment rate
Borrowing costs expensed = costs incurred − costs included
Calculation
20,000
Borrowing costs incurred over the whole period (loan schedule) ; − Borrowing costs included in the asset (before investment income)

Journal entries

Entries

Actual borrowing costs included in the qualifying asset
Entry
Account Debit Credit
Asset under construction 20,000
Interest payable 20,000
Investment income, deducted from the amount included
Entry
Debit Cash ← Investment income on temporary investment = unspent funds × investment rate ; Credit Asset under construction ← Investment income on temporary investment = unspent funds × investment rate
Borrowing costs not eligible, expensed
Entry
Account Debit Credit
Interest expense 20,000
Interest payable 20,000

Account	Debit	Credit
Asset under construction	20,000
Interest payable		20,000

Account	Debit	Credit
Interest expense	20,000
Interest payable		20,000

Judgements

Judgment

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Specific borrowing, general borrowings or no qualifying asset
JudgmentRequired
No qualifying asset: costs expensed
Specific borrowing / General borrowings / No qualifying asset: costs expensed
Rule and cross-reference: borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset; other borrowing costs are expensed (IAS 23, para. 8). For a specific borrowing, the investment income on the temporary investment of the funds is deducted (IAS 23, para. 12).
Rationale: use of the funds, qualifying character of the asset
TextRequired

Conclusion

Costs included, investment income and expenses submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Nature of the borrowing documentedPass
Inclusion entry balancedPass
Expense entry balancedPass

Assets: 20,000
Liabilities: 40,000
Profit or loss: -20,000
OCI: 0
Equity: -20,000

File and entity

Specific borrowing: actual costs, investment income on temporary investment and eligible amount

Case tasks documented here

Compute the actual borrowing costs of the inclusion period.
Compute the investment income on the temporary investment.
Compute the eligible costs.
Record the inclusion, the investment income and the expense of January and February.

Inputs

Loan and asset: nature, terms, drawdowns and use of funds
Text
EMPRUNT_SPECIFIQUE_FINANCANT_UNE_USINE
Principal borrowed for the asset
Number
2,000,000
Rate for the period (annual effective rate × fraction of period, case data)
Number
5 %
Borrowed funds not yet spent (average for the period)
Number
800,000
Investment rate for the period (annual rate × fraction of period)
Number
1 %
Borrowing costs incurred over the whole period (loan schedule)
Number
120,000
Borrowing costs included in the asset (before investment income)
Number
100,000

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Points reviewed: qualifying asset, components, inclusion or expense, investment income
ChecklistRequired
- Qualifying asset character assessed
- Components of borrowing costs identified
- Inclusion or expense decided for the period
- Investment income deducted
- Link with the cost of a qualifying inventory checked

Calculations

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Actual borrowing costs of the period = principal × rate for the period
Calculation
100,000
Principal borrowed for the asset ; Rate for the period (annual effective rate × fraction of period, case data)
Investment income on temporary investment = unspent funds × investment rate
Calculation
8,000
Borrowed funds not yet spent (average for the period) ; Investment rate for the period (annual rate × fraction of period)
Eligible costs = actual costs − investment income
Calculation
92,000
Actual borrowing costs of the period = principal × rate for the period ; − Investment income on temporary investment = unspent funds × investment rate
Borrowing costs expensed = costs incurred − costs included
Calculation
20,000
Borrowing costs incurred over the whole period (loan schedule) ; − Borrowing costs included in the asset (before investment income)

Journal entries

Entries

Actual borrowing costs included in the qualifying asset
Entry
Account Debit Credit
Asset under construction 100,000
Interest payable 100,000
Investment income, deducted from the amount included
Entry
Account Debit Credit
Cash 8,000
Asset under construction 8,000
Borrowing costs not eligible, expensed
Entry
Account Debit Credit
Interest expense 20,000
Interest payable 20,000

Account	Debit	Credit
Asset under construction	100,000
Interest payable		100,000

Account	Debit	Credit
Cash	8,000
Asset under construction		8,000

Account	Debit	Credit
Interest expense	20,000
Interest payable		20,000

Judgements

Judgment

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Specific borrowing, general borrowings or no qualifying asset
JudgmentRequired
Specific borrowing
Specific borrowing / General borrowings / No qualifying asset: costs expensed
Rule and cross-reference: borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset; other borrowing costs are expensed (IAS 23, para. 8). For a specific borrowing, the investment income on the temporary investment of the funds is deducted (IAS 23, para. 12).
Rationale: use of the funds, qualifying character of the asset
TextRequired

Conclusion

Costs included, investment income and expenses submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Nature of the borrowing documentedPass
Inclusion entry balancedPass
Expense entry balancedPass

Assets: 100,000
Liabilities: 120,000
Profit or loss: -20,000
OCI: 0
Equity: -20,000

File and entity

File of a capitalised project: capitalisation of borrowing costs, suspension, placing in service and interaction with an asset grant

Case tasks documented here

Compute the actual borrowing costs of the inclusion period of the kiln.
Compute the investment income on the temporary investment.
Compute the eligible borrowing costs of the kiln.
Record the borrowing costs, the grant, the transfer, the depreciation and the release.

Inputs

Loan and asset: nature, terms, drawdowns and use of funds
Text
EMPRUNT_SPECIFIQUE_FINANCANT_UN_FOUR
Principal borrowed for the asset
Number
1,500,000
Rate for the period (annual effective rate × fraction of period, case data)
Number
4 %
Borrowed funds not yet spent (average for the period)
Number
500,000
Investment rate for the period (annual rate × fraction of period)
Number
1 %
Borrowing costs incurred over the whole period (loan schedule)
Number
75,000
Borrowing costs included in the asset (before investment income)
Number
60,000

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Points reviewed: qualifying asset, components, inclusion or expense, investment income
ChecklistRequired
- Qualifying asset character assessed
- Components of borrowing costs identified
- Inclusion or expense decided for the period
- Investment income deducted
- Link with the cost of a qualifying inventory checked

Calculations

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Actual borrowing costs of the period = principal × rate for the period
Calculation
60,000
Principal borrowed for the asset ; Rate for the period (annual effective rate × fraction of period, case data)
Investment income on temporary investment = unspent funds × investment rate
Calculation
5,000
Borrowed funds not yet spent (average for the period) ; Investment rate for the period (annual rate × fraction of period)
Eligible costs = actual costs − investment income
Calculation
55,000
Actual borrowing costs of the period = principal × rate for the period ; − Investment income on temporary investment = unspent funds × investment rate
Borrowing costs expensed = costs incurred − costs included
Calculation
15,000
Borrowing costs incurred over the whole period (loan schedule) ; − Borrowing costs included in the asset (before investment income)

Journal entries

Entries

Actual borrowing costs included in the qualifying asset
Entry
Account Debit Credit
Asset under construction 60,000
Interest payable 60,000
Investment income, deducted from the amount included
Entry
Account Debit Credit
Cash 5,000
Asset under construction 5,000
Borrowing costs not eligible, expensed
Entry
Account Debit Credit
Interest expense 15,000
Interest payable 15,000

Account	Debit	Credit
Asset under construction	60,000
Interest payable		60,000

Account	Debit	Credit
Cash	5,000
Asset under construction		5,000

Account	Debit	Credit
Interest expense	15,000
Interest payable		15,000

Judgements

Judgment

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Specific borrowing, general borrowings or no qualifying asset
JudgmentRequired
Specific borrowing
Specific borrowing / General borrowings / No qualifying asset: costs expensed
Rule and cross-reference: borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset; other borrowing costs are expensed (IAS 23, para. 8). For a specific borrowing, the investment income on the temporary investment of the funds is deducted (IAS 23, para. 12).
Rationale: use of the funds, qualifying character of the asset
TextRequired

Conclusion

Costs included, investment income and expenses submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Nature of the borrowing documentedPass
Inclusion entry balancedPass
Expense entry balancedPass

Assets: 60,000
Liabilities: 75,000
Profit or loss: -15,000
OCI: 0
Equity: -15,000

Inputs

Loan and asset: nature, terms, drawdowns and use of funds
Text
Principal borrowed for the asset
Number
Rate for the period (annual effective rate × fraction of period, case data)
Number
Borrowed funds not yet spent (average for the period)
Number
Investment rate for the period (annual rate × fraction of period)
Number
Borrowing costs incurred over the whole period (loan schedule)
Number
Borrowing costs included in the asset (before investment income)
Number

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Points reviewed: qualifying asset, components, inclusion or expense, investment income
ChecklistRequired
- Qualifying asset character assessed
- Components of borrowing costs identified
- Inclusion or expense decided for the period
- Investment income deducted
- Link with the cost of a qualifying inventory checked

Calculations

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Actual borrowing costs of the period = principal × rate for the period
Calculation
Principal borrowed for the asset ; Rate for the period (annual effective rate × fraction of period, case data)
Investment income on temporary investment = unspent funds × investment rate
Calculation
Borrowed funds not yet spent (average for the period) ; Investment rate for the period (annual rate × fraction of period)
Eligible costs = actual costs − investment income
Calculation
Actual borrowing costs of the period = principal × rate for the period ; − Investment income on temporary investment = unspent funds × investment rate
Borrowing costs expensed = costs incurred − costs included
Calculation
Borrowing costs incurred over the whole period (loan schedule) ; − Borrowing costs included in the asset (before investment income)

Journal entries

Entries

Actual borrowing costs included in the qualifying asset
Entry
Debit Asset under construction ← Actual borrowing costs of the period = principal × rate for the period ; Credit Interest payable ← Actual borrowing costs of the period = principal × rate for the period
Investment income, deducted from the amount included
Entry
Debit Cash ← Investment income on temporary investment = unspent funds × investment rate ; Credit Asset under construction ← Investment income on temporary investment = unspent funds × investment rate
Borrowing costs not eligible, expensed
Entry
Debit Interest expense ← Borrowing costs expensed = costs incurred − costs included ; Credit Interest payable ← Borrowing costs expensed = costs incurred − costs included

Judgements

Judgment

IAS 23 §6IAS 23 §7IAS 23 §8IAS 23 §12

Specific borrowing, general borrowings or no qualifying asset
JudgmentRequired
Specific borrowing / General borrowings / No qualifying asset: costs expensed
Rule and cross-reference: borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset; other borrowing costs are expensed (IAS 23, para. 8). For a specific borrowing, the investment income on the temporary investment of the funds is deducted (IAS 23, para. 12).
Rationale: use of the funds, qualifying character of the asset
TextRequired

Conclusion

Costs included, investment income and expenses submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Normative references

References

Paragraphs cited in this workpaper and their verification status
References