CERTYNEX IFRS ACADEMY

Vauban borrowed 5,000,000 to finance the construction of a storage warehouse, which is a qualifying asset. It also uses an overdraft for its day-to-day cash needs, unrelated to the project. For the year, it incurred 300,000 of interest on the construction loan and 20,000 of interest on the overdraft. Which treatment is consistent with the standard's principle?

Include the whole 320,000 in the cost of the warehouse, since all the interest of the year is borne by the same company.

Include the 300,000 on the construction loan in the cost of the warehouse and expense the 20,000 on the overdraft.

Expense the whole 320,000 in the year, because interest is by nature a finance expense.

Split the 320,000 half into the cost of the warehouse and half into expenses, as a precaution.