Extended interruption of active development

Learning objectives

• Determine the suspension of capitalisation during extended periods in which active development is interrupted.L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Suspension during extended periods of interrupted development" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 23 §20Capitalisation is suspended during extended periods in which active development is interrupted.

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

4 questions

• Work on a warehouse is interrupted for several months: active development stops for lack of funding of the contractor, while the entity's loan continues to run. What happens to the capitalisation of borrowing costs during this extended interruption?L2
• A specific loan of {principal} at {annual_rate} a year finances a plant all year. Active development is interrupted for {suspended_months} (extended interruption, case data); for the rest of the year, {total_months} in total, capitalisation is open. No funds are temporarily invested. Calculate the interest capitalised and the interest expensed for the year.L3
• Aurore is building a solar park. Active development is interrupted for 5 months following a dispute with a supplier, while the project's specific loan continues to run. Management hesitates over continuing to capitalise borrowing costs. In a few sentences, justify the treatment of borrowing costs during this interruption.L4
• 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