Group borrowings

Learning objectives

• Assess whether the borrowings of the parent and its subsidiaries should be pooled to calculate the rate, or each subsidiary should use its own borrowings (judgement).L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Group pooling of borrowings" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §15General borrowings: depending on the circumstances, it is appropriate either to include all borrowings of the parent and its subsidiaries when computing the weighted average of the borrowing costs, or for each subsidiary to use a weighted average of the borrowing costs applicable to its own borrowings.

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

2 questions

• Within a group, the standard prohibits pooling the borrowings of the parent and its subsidiaries to compute the weighted average of borrowing costs.L3
• The Sérignan group finances a plant with the general borrowings of the parent ({parent_borrowings}, costs for the year: {parent_costs}) and those of a subsidiary ({subsidiary_borrowings}, costs for the year: {subsidiary_costs}), outstanding all year. Group judgement (case data): pooling the borrowings is appropriate for computing the rate. The weighted average expenditure on the plant is {weighted_expenditure}. Calculate the group's capitalisation rate and the costs eligible for capitalisation.L4