Specific borrowing outstanding after completion

Learning objectives

• Analyse the treatment of a specific borrowing that remains outstanding after the asset is ready (it becomes part of general borrowings; 2015-2017 annual improvements).L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Specific borrowing outstanding after the asset is ready (2015-2017 improvement)" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §14General borrowings: capitalisation rate = weighted average of the borrowing costs of the period, applied to the expenditures on the asset, provided that the amount capitalised during the period does not exceed the borrowing costs incurred during that period (last sentence of para. 14); since the 2015-2017 annual improvements, a specific borrowing that remains outstanding after the asset is ready becomes part of general borrowings.
• IAS 23 §28ATransition for the amendment to para. 14 (Annual Improvements 2015-2017, December 2017): it applies to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies it, without restating prior amounts.

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

2 questions

• Quenelle has a general borrowing of {general_borrowing} (costs for the year: {general_costs}). In addition, a specific borrowing of {specific_borrowing}, taken out for an asset completed before the start of the year, remains outstanding all year (costs for the year: {specific_costs}). Calculate the capitalisation rate for general borrowings for the year, allowing for the treatment of the specific borrowing still outstanding.L3
• The Hélios group financed power station C with a specific borrowing of 4,000,000. Power station C enters service on 30 June; at 31 December, 1,500,000 of that borrowing remains outstanding. Hélios is also building plant U, financed by its general borrowings. In a few sentences, justify the treatment of the 1,500,000 still outstanding in calculating the capitalisation rate for plant U.L4