Interaction with IAS 36 and IAS 2: recoverable amount

Learning objectives

• Analyse whether the carrying amount must be written down to recoverable amount or net realisable value after capitalisation, under the other Standards.L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Interaction with IAS 36 and IAS 2: recoverable amount and NRV test" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §16When the carrying amount or the expected ultimate cost of the qualifying asset exceeds its recoverable amount or net realisable value, the carrying amount is written down or written off in accordance with the other Standards, with a possible reversal under those Standards. The cap on capitalised costs is set by para. 14.

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

3 questions

• An entity has capitalised borrowing costs in the cost of a qualifying asset. What must it check before keeping the carrying amount so obtained?L3
• A hotel under construction of Pelissier is carried at {carrying_amount}, including {capitalised_borrowing_costs} of capitalised borrowing costs. Its recoverable amount is estimated at {recoverable_amount} (case data). Calculate the carrying amount after comparison with the recoverable amount, then the loss to recognise.L3
• Roquebrune is constructing an office building for its own use. At the reporting date, its carrying amount is 14,200,000, including 1,100,000 of capitalised borrowing costs. Its recoverable amount is estimated at 13,400,000 (case data). In a few sentences, justify the treatment to adopt and its effect on the financial statements.L4