ias 23 borrowing costs

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On 1 January 2014 Mine-Tech Ltd borrowed £10million at an interest rate of 6% to fund the construction of a new manufacturing site. Land at a cost of £4million was acquired on 1 February 2014 and construction commenced on 1 May 2014. Construction was completed on 30 September 2014 at an additional cost of £9.5million. Although the plant was usable from that date production did not commence until 1 December 2014 due to marketing delays. No investment income was earned on the temporary investment of any unused funds.

How would I account for this and with accounts would be debited and credited ??
 
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My disclaimer is i'm a student as well so don't blindly take what I say as correct.

What stands out to me is that you have to capitalize your borrowing costs to the asset under construction. Once the manufacturing plant is complete or available to be used you no longer capitalize the borrowing costs to the asset and must start depreciating the building. The fact it's not being used from Oct 1 to Dec 1 is not the determining factor in whether or not the borrowing costs are capitalized; it's whenever its available to be used.

"Capitalisation should cease when substantially all of the activities necessary to prepare the asset for its intended use or sale are complete. [IAS 23.22] If only minor modifications are outstanding, this indicates that substantially all of the activities are complete. [IAS 23.23]"

Borrowing costs to be debited to the asset should be: 10mil*6%*9/12=450,000.

Borrowing costs for the rest of the year ending Dec 31: 10mil*6%*3/12=150,000

I know that's not the complete answer you wanted but hopefully somewhat helpful.
 
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