Directly attributable costs

Learning objectives

• Distinguish borrowing costs directly attributable to the asset from those that would have been incurred in any event.L2, L3

Normative references

• IAS 23 §10Borrowing costs directly attributable to a qualifying asset are those that would have been avoided if the expenditure on the asset had not been made; for a borrowing made specifically for that purpose, they can be readily identified.
• IAS 23 §11It may be difficult to identify a direct relationship between particular borrowings and a qualifying asset, and the borrowings that could otherwise have been avoided (centrally coordinated financing, a range of debt instruments within a group, loans in foreign currencies); determining the amount of directly attributable borrowing costs is difficult and requires the exercise of judgement.

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

3 questions

• Nérée's closing file puts forward four justifications for including interest in the cost of a plant under construction. Which one is incorrect?L2
• Lumen borrowed {loan_principal} at {loan_rate} a year to build a warehouse, a qualifying asset. The loan was fully spent at the start of the year on the works, and its annual interest, payable at the end of the year, is directly attributable to the warehouse. Record the entry for the interest of the year.L3
• The Quintal group is building a plant. It raised a loan dedicated to the works and also uses a cash facility, which financed partly the plant contractors' invoices and partly the entity's salaries. In three to five sentences, justify which interest you would regard as directly attributable to the plant.L3