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Actual costs of the specific borrowing
Learning objectives
- Calculate the borrowing costs eligible for capitalisation on a specific borrowing (actual borrowing costs incurred during the period).L1, L2, L3
- Justify and defend in a professional file (L4) the treatment adopted for the "Specific borrowings: actual borrowing costs incurred" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4
Normative references
- IAS 23 §12Specific borrowing: the borrowing costs eligible for capitalisation are the actual borrowing costs incurred on that borrowing during the period, less any investment income on the temporary investment of those borrowings.
Original summaries of the paragraphs (reference register), never a quotation of the standard.
4 questions
- For a borrowing taken out specifically to obtain a qualifying asset, the borrowing costs eligible for capitalisation start from the costs actually incurred on that borrowing during the period, not from an average rate computed on all borrowings.L1
- Brisac drew a loan of {principal} on 1 March, dedicated to the construction of a plant, at an effective interest rate of {effective_rate} a year. Expenditure, borrowing costs and preparation activities all begin the same day (case data) and the year ends on 31 December, that is {months_capitalised}. No funds are temporarily invested. Calculate the borrowing costs eligible for capitalisation for the year.L3
- Hélios draws a specific borrowing of 6,000,000 on 1 January, dedicated to the construction of a warehouse. Its nominal rate is 4.5%, but its effective interest rate, which includes the issue costs, is 6% (case data). Expenditure, borrowing costs and preparation activities are all in place from 1 March; the year ends on 31 December and no funds are temporarily invested. What amount of borrowing costs is eligible for capitalisation for the year?L4
- The internal controller rereads the file of Orsay, which finances a power station with a specific borrowing. Which of the following sentences is incorrect?L3
Practical cases
- Specific borrowing: actual costs, investment income on temporary investment and eligible amountL2
- Asset financed by a specific borrowing and an asset grant: cost, depreciation, profit or loss and financial statementsL4
- File of a capitalised project: capitalisation of borrowing costs, suspension, placing in service and interaction with an asset grantL4
Workpapers
- Specific borrowing inclusion fileL1, L2, L3