No suspension: technical work and inherent delays

Learning objectives

• Distinguish an interruption that suspends capitalisation from a temporary delay that is a necessary part of the process or from substantial technical work.L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "No suspension for technical work or temporary delays" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §21Capitalisation is not suspended during a period when substantial technical and administrative work is carried out, nor when a temporary delay is a necessary part of the process of getting the asset ready.

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

3 questions

• While the entity carries out substantial technical and administrative work on the project, capitalisation of borrowing costs is suspended.L2
• Work on a bridge is slowed for 3 weeks by a river flood, a temporary event inherent in this type of project (case data). Work then resumes normally. What is the effect on the capitalisation of borrowing costs?L3
• A specific loan of {principal} at {annual_rate} a year finances a project whose length, from the start of capitalisation to completion, is {project_months}. During the project: a temporary delay of {temporary_delay} due to weather, inherent in the process (case data), and an extended interruption of {extended_interruption} for lack of funding of the contractor. No funds are temporarily invested. Calculate the capitalisation period and the borrowing costs eligible for capitalisation.L4