CERTYNEX IFRS ACADEMY

Orvault finances a power station with a specific borrowing of 8,000,000 at 6% a year, drawn on 1 January; capitalisation is open all year. The funds not yet spent were temporarily invested and earned 55,000 over the year (case data). Which treatment of borrowing costs is correct for the year?

425,000 included in the cost of the power station; the 55,000 of investment income is deducted, with no separate income in profit.

480,000 included in the cost of the power station; the 55,000 of investment income is recognised as finance income for the year.

425,000 included; in addition, the 55,000 of investment income is recognised as finance income for the year.

480,000 expensed, because the power station is not yet in service; the 55,000 of investment income is recognised as finance income.