Eligible expenditure

Learning objectives

• Calculate the eligible expenditure: payments of cash, transfers of other assets and the assumption of interest-bearing liabilities, net of progress payments and grants received.L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Eligible expenditure (net of progress payments and grants)" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §18Eligible expenditures: payments of cash, transfers of other assets or the assumption of interest-bearing liabilities, net of any progress payments received and grants received in connection with the asset.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

4 questions

• Delorme is building a workshop. It paid {cash_paid} in cash, transferred assets worth {other_assets_transferred} to the contractors, assumed interest-bearing liabilities of {interest_bearing_liabilities} and received progress payments of {progress_payments_received} in respect of the workshop. Calculate the expenditure eligible for the capitalisation of borrowing costs.L2
• Maury is building a plant financed by its general borrowings. Eligible expenditure for the year: {expenditure_1} incurred {months_1} ago; {expenditure_2} incurred {months_2} ago; {expenditure_3} incurred {months_3} ago. The capitalisation rate is {capitalisation_rate}. Calculate the weighted average expenditure, then the borrowing costs eligible for capitalisation (cap not reached, case data).L3
• Valmy is building a workshop, a qualifying asset. It receives in cash a grant related to the asset of {grant_received}. Case convention: the grant is presented as a deduction from the cost of the workshop under construction. Record the entry for receipt of the grant.L3
• Perret is building a data centre. At the calculation date, it has paid 2,000,000 in cash, transferred assets worth 300,000 to the contractors, assumed interest-bearing liabilities of 500,000, received progress payments of 400,000 and received an asset grant of 600,000 (case data). What is the expenditure eligible for the capitalisation of borrowing costs?L4