Interaction with IAS 16

Learning objectives

• Analyse the inclusion of capitalised borrowing costs in the cost of a self-constructed asset (IAS 16, paras. 22 and 23) and in the depreciable amount.L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Interaction with IAS 16: cost of self-constructed assets and depreciation" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §8Borrowing costs directly attributable to a qualifying asset are capitalised as part of its cost; other borrowing costs are recognised as an expense in the period.

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

2 questions

• Cardin has constructed an item of equipment whose eligible expenditure amounts to {eligible_expenditure}. It has capitalised {capitalised_borrowing_costs} of borrowing costs in it. Case convention: straight-line depreciation over {useful_life}, with no residual value. Calculate the cost of the asset, then the annual depreciation charge.L3
• Verdier puts into service a production line whose construction expenditure is {construction_expenditure} and in which {capitalised_borrowing_costs} of borrowing costs have been capitalised. Case convention: straight-line depreciation over {useful_life}, with no residual value. Record the entry for the annual depreciation charge.L4