Question bank — IAS 23 — Borrowing Costs
71 questions in FR/EN/ES, scored by the real scoring engine.
Principle of the standard2 questions
- Borrowing costs that relate directly to the construction of a qualifying asset are added to the cost of that asset.True / falseL1
- Vauban borrowed 5,000,000 to finance the construction of a storage warehouse, which is a qualifying asset. It also uses an overdraft for its day-to-day cash needs, unrelated to the project. For the year, it incurred 300,000 of interest on the construction loan and 20,000 of interest on the overdraft. Which treatment is consistent with the standard's principle?Single choiceL2
Capitalise or expense3 questions
- An entity incurs borrowing costs that are not directly attributable to a qualifying asset. How does it account for them?Single choiceL1
- Tamaris incurred … of borrowing costs in the year. Part of it, …, is directly attributable to a plant under construction and is included in its cost. Calculate the amount of borrowing costs to be expensed.CalculationL2
- Cormier incurred … of borrowing costs in the year, still payable at the reporting date. Of this total, … is directly attributable to a workshop under construction (qualifying asset); the balance is attached to no asset. Record the entries for the year (one entry for the part capitalised, one for the part expensed).Journal entryL3
Conditions for capitalisation1 question
Directly attributable costs3 questions
- Nérée's closing file puts forward four justifications for including interest in the cost of a plant under construction. Which one is incorrect?Single choiceL2
- Lumen borrowed … at … a year to build a warehouse, a qualifying asset. The loan was fully spent at the start of the year on the works, and its annual interest, payable at the end of the year, is directly attributable to the warehouse. Record the entry for the interest of the year.Journal entryL3
- The Quintal group is building a plant. It raised a loan dedicated to the works and also uses a cash facility, which financed partly the plant contractors' invoices and partly the entity's salaries. In three to five sentences, justify which interest you would regard as directly attributable to the plant.JudgmentL3
Scope of the standard1 question
Scope exemption (para. 4)1 question
The qualifying asset2 questions
- Which of these descriptions matches a qualifying asset?Single choiceL1
- Aubrac is building two items: a cold-storage warehouse whose construction takes 16 months, and a standard machine assembled in 6 weeks. The accountant hesitates because the standard sets no quantified duration for a substantial period. In three to five sentences, justify your conclusion on whether each asset is qualifying.JudgmentL3
Borrowing costs2 questions
- Borrowing costs are limited to the interest paid to the lender: the other costs the entity incurs in order to borrow funds are not part of them.True / falseL1
- Varenne is financing a construction project. It notes four items for its year: (1) interest on a bank loan, calculated at the effective interest rate; (2) interest on the lease liability of a lease contract; (3) the salaries of the project team; (4) the architect's fees. Which items are borrowing costs?Single choiceL2
Examples of qualifying assets2 questions
- Among these assets, which is typically a qualifying asset?Single choiceL1
- Sorbier borrowed to finance five assets: (a) a pharmaceutical plant whose construction takes 20 months; (b) a batch of investment securities; (c) packaging inventories manufactured in 2 days; (d) a ship under construction for 30 months; (e) software developed in-house over 24 months. Based on the standard's examples, how many of these assets can be qualifying assets?Single choiceL2
Interest and lease liabilities2 questions
- Delmas drew a loan of … at an effective interest rate of … a year. The loan was outstanding for … of the year. Calculate the interest for the year on this loan, at the effective interest rate.CalculationL2
- Trianon is building a logistics centre. For the year, it notes: 190,000 of interest on a bond, calculated at the effective interest rate; 35,000 of interest on the lease liability of a leased warehouse; and an exchange difference of 22,000 on a dollar loan, of which 14,000 is regarded as an adjustment to interest (case data). What is the total of the borrowing costs for the year?Single choiceL3
Exchange differences regarded as interest1 question
Actual costs of the specific borrowing3 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.True / falseL1
- Brisac drew a loan of … on 1 March, dedicated to the construction of a plant, at an effective interest rate of … a year. Expenditure, borrowing costs and preparation activities all begin the same day (case data) and the year ends on 31 December, that is …. No funds are temporarily invested. Calculate the borrowing costs eligible for capitalisation for the year.CalculationL3
- 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?Single choiceL4
Temporary investment income3 questions
- Cordier finances a power station with a specific borrowing whose actual costs for the year are …. For …, part of the funds not yet spent, …, is temporarily invested at … a year. Calculate the investment income, then the amount of borrowing costs eligible for capitalisation.CalculationL2Variant
- Fabrèges finances a logistics park with a specific borrowing whose interest for the year is …, payable at the end of the year. The funds not yet spent were temporarily invested and earned … received in cash. Case convention: the investment income is presented as a deduction from the amount capitalised. Record the entry for the interest capitalised, then the entry for the investment income.Journal entryL3Variant
- Orvault finances a power station with a specific borrowing of 8,000,000 at 6% a year, drawn on 1 January; capitalisation is open all year. The funds not yet spent were temporarily invested and earned 55,000 over the year (case data). Which treatment of borrowing costs is correct for the year?Single choiceL4
Complements on specific borrowings1 question
The capitalisation rate4 questions
- For funds borrowed generally and used to obtain a qualifying asset, how is the capitalisation rate determined?Single choiceL2
- Mauzac's general borrowings, outstanding all year, are: a borrowing of … (costs for the year: …) and a borrowing of … (costs for the year: …). Calculate the capitalisation rate for the year.CalculationL3
- Perrin is building a workshop financed by its general borrowings. The weighted average expenditure for the workshop in the year is … and the capitalisation rate is …. Case convention: the borrowing costs incurred in the period exceed the amount calculated and are payable at the end of the year. Record the entry for the borrowing costs capitalised.Journal entryL3
- The Meridian group finances plant P, under construction, with a specific borrowing. It is also building warehouse Q, financed by its general borrowings (a bond and a bank loan). The specific borrowing for plant R, already completed, is still outstanding. In a few sentences, justify the borrowings you would include in the capitalisation rate for warehouse Q.JudgmentL4
Specific borrowing outstanding after completion2 questions
- Quenelle has a general borrowing of … (costs for the year: …). In addition, a specific borrowing of …, taken out for an asset completed before the start of the year, remains outstanding all year (costs for the year: …). Calculate the capitalisation rate for general borrowings for the year, allowing for the treatment of the specific borrowing still outstanding.CalculationL3
- The Hélios group financed power station C with a specific borrowing of 4,000,000. Power station C enters service on 30 June; at 31 December, 1,500,000 of that borrowing remains outstanding. Hélios is also building plant U, financed by its general borrowings. In a few sentences, justify the treatment of the 1,500,000 still outstanding in calculating the capitalisation rate for plant U.JudgmentL4
Group borrowings2 questions
- Within a group, the standard prohibits pooling the borrowings of the parent and its subsidiaries to compute the weighted average of borrowing costs.True / falseL3
- The Sérignan group finances a plant with the general borrowings of the parent (…, costs for the year: …) and those of a subsidiary (…, costs for the year: …), outstanding all year. Group judgement (case data): pooling the borrowings is appropriate for computing the rate. The weighted average expenditure on the plant is …. Calculate the group's capitalisation rate and the costs eligible for capitalisation.CalculationL4
The cap at costs incurred3 questions
- For a qualifying asset financed by its general borrowings, Altair calculates costs eligible for capitalisation of …, whereas its borrowing costs incurred in the year amount to …. What amount can be capitalised in the asset?CalculationL2Variant
- Four colleagues comment on the cap applicable to capitalised borrowing costs. Which of the following statements is incorrect?Single choiceL3Variant
- Brémont is building a warehouse financed by its general borrowings: 3,000,000 outstanding all year, with borrowing costs incurred of 195,000 (a capitalisation rate of 6.5%). The weighted average expenditure on the warehouse is 3,400,000 (case data, part being financed from own cash). What amount of borrowing costs can be capitalised for the year?Single choiceL3Variant
The three elements of commencement3 questions
- When can the capitalisation of borrowing costs begin for a qualifying asset?Single choiceL1
- Landry draws a loan of … on 1 January at … a year. Expenditure, borrowing costs and preparation activities are all in place only … later, on 1 May. The year ends on 31 December and no funds are temporarily invested. Calculate the interest eligible for capitalisation for the year and the interest recognised as an expense.CalculationL2
- Fontan is building a warehouse. It draws its loan on 15 March and pays the first contractor invoice on 1 April, but earthworks only begin on 20 April (the preparation activities start only on that date, case data). In three to five sentences, justify the commencement date of capitalisation of borrowing costs.JudgmentL3
Eligible expenditure4 questions
- Delorme is building a workshop. It paid … in cash, transferred assets worth … to the contractors, assumed interest-bearing liabilities of … and received progress payments of … in respect of the workshop. Calculate the expenditure eligible for the capitalisation of borrowing costs.CalculationL2Variant
- Maury is building a plant financed by its general borrowings. Eligible expenditure for the year: … incurred … ago; … incurred … ago; … incurred … ago. The capitalisation rate is …. Calculate the weighted average expenditure, then the borrowing costs eligible for capitalisation (cap not reached, case data).CalculationL3
- Valmy is building a workshop, a qualifying asset. It receives in cash a grant related to the asset of …. Case convention: the grant is presented as a deduction from the cost of the workshop under construction. Record the entry for receipt of the grant.Journal entryL3Variant
- Perret is building a data centre. At the calculation date, it has paid 2,000,000 in cash, transferred assets worth 300,000 to the contractors, assumed interest-bearing liabilities of 500,000, received progress payments of 400,000 and received an asset grant of 600,000 (case data). What is the expenditure eligible for the capitalisation of borrowing costs?Single choiceL4Variant
Land awaiting with no activity1 question
Extended interruption of active development3 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?Single choiceL2Variant
- A specific loan of … at … a year finances a plant all year. Active development is interrupted for … (extended interruption, case data); for the rest of the year, … in total, capitalisation is open. No funds are temporarily invested. Calculate the interest capitalised and the interest expensed for the year.CalculationL3Variant
- 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.JudgmentL4Variant
No suspension: technical work and inherent delays3 questions
- While the entity carries out substantial technical and administrative work on the project, capitalisation of borrowing costs is suspended.True / falseL2
- 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?Single choiceL3
- A specific loan of … at … a year finances a project whose length, from the start of capitalisation to completion, is …. During the project: a temporary delay of … due to weather, inherent in the process (case data), and an extended interruption of … for lack of funding of the contractor. No funds are temporarily invested. Calculate the capitalisation period and the borrowing costs eligible for capitalisation.CalculationL4
Substantial completion3 questions
- When does capitalisation of borrowing costs cease for a qualifying asset?Single choiceL2
- Garance's plant is ready for its intended use: substantially all the preparation activities are complete. The cumulative cost in assets under construction comprises … of construction expenditure and … of capitalised borrowing costs. Record the entry for entry into service.Journal entryL3
- Marsac's plant, whose construction expenditure amounts to …, is financed in part by a specific loan of … at … a year, drawn on 1 January. Substantially all the preparation activities are complete on 31 October. The year ends on 31 December: … of capitalisation, then … after completion. No funds are temporarily invested. Calculate the borrowing costs capitalised, those expensed, then the cost of the asset.CalculationL4
Asset completed in parts1 question
Amount of borrowing costs capitalised1 question
Capitalisation rate used2 questions
- An entity that determines the costs eligible for capitalisation using a capitalisation rate does not have to disclose that rate.True / falseL2
- To prepare its notes, Rivoire has the following data on its general borrowings: borrowing costs for the year …; weighted average amount outstanding …. The weighted average expenditure on the qualifying asset is … (cap not reached, case data). Calculate the capitalisation rate to disclose and the amount of borrowing costs capitalised to disclose.CalculationL3
Original provisions (2007)1 question
Annual Improvements 2015-20171 question
Interaction with IAS 36 and IAS 2: recoverable amount3 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?Single choiceL3
- A hotel under construction of Pelissier is carried at …, including … of capitalised borrowing costs. Its recoverable amount is estimated at … (case data). Calculate the carrying amount after comparison with the recoverable amount, then the loss to recognise.CalculationL3
- 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.JudgmentL4
Interaction with IAS 162 questions
- Cardin has constructed an item of equipment whose eligible expenditure amounts to …. It has capitalised … of borrowing costs in it. Case convention: straight-line depreciation over …, with no residual value. Calculate the cost of the asset, then the annual depreciation charge.CalculationL3
- Verdier puts into service a production line whose construction expenditure is … and in which … of borrowing costs have been capitalised. Case convention: straight-line depreciation over …, with no residual value. Record the entry for the annual depreciation charge.Journal entryL4
Interaction with IAS 21 question
Interaction with IAS 381 question
Interaction with IAS 20: asset grants3 questions
- Lucas is building a logistics platform. It paid … in cash and assumed interest-bearing liabilities of …; it received a grant related to the asset of …. Case convention: a specific borrowing finances exactly the eligible expenditure, at … a year, for …. Calculate the eligible expenditure, then the borrowing costs eligible for capitalisation.CalculationL3
- Naval acquires equipment of 4,000,000 and receives an asset grant of 800,000. Case convention: straight-line depreciation over 10 years with no residual value; the entity chooses between two presentations, deferred income released over 10 years, or deduction of the grant from the cost of the asset. What is the difference in net annual effect on profit or loss between the two presentations?Single choiceL4
- Calypso is constructing a plant financed by a specific borrowing and by an asset grant of 800,000. It may present the grant as deferred income or as a deduction from the cost of the asset (entity's choice, case data). In a few sentences, justify the effect of the grant on the expenditure eligible for capitalising interest, then on the cost of the asset and the financial statements under the presentation adopted.JudgmentL4