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Question · Capitalisation of borrowing costs (IAS 23)

Dupuy is building a plant for EUR 5,000,000 with a grant of EUR 1,000,000, which it presents as deferred income. The finance director states that, since the grant sits in liabilities, the asset stays at gross cost and the borrowing cost capitalisation base is therefore the gross expenditure. Case convention: the capitalisation base is the expenditure incurred net of the grant received for the asset, whatever the presentation adopted. In three to five sentences, discuss this statement.

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Judgment question: compare your answer with the criteria and the model explanation.

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