A232 FAR2_PPE_1st Class

Which MFRS that govern Interest capitalization

• MFRS116

• MFRS136

• MFRS123

• MFRS122

Para 8, MFRS 123:

  Borrowing cost that are indirectly attributable to the   acquisition, construction or production of qualifying assets are capitalized to the cost of the assets.

• True

• False

Capitalization considers three items:

• Qualifying assets

• Capitalization period

• Borrowing costs

• Amount to capitalize

"Require a substantial period of time to get them ready for their intended use or sale". This statement refers to the...

• Amount to capitalize

• Capitalization period

• Qualifying Assets

The capitalization of interest begins when:

• Expenditures for the assets are being incurred.

• Activities for readying the asset for use or sale are in progress.

• The asset is substantially complete and ready for use.

• Interest costs are being incurred.

TBM had a 15%, four-year, RM2,000,000 note to finance the purchase of land and construct the building. Borrowing costs incurred RM300,000. Investment income RM75,000 (return from a portion of the borrowing that had not yet been used). How much of the borrowing cost to be capitalized?

• 300,000

• 75,000

• 375,000

• 225,000

The amount of borrowing cost to be capitalized depending on whether there is specific debt that has been incurred to fund the project OR whether the project is being funded from the general debt obligations of the company.

• True

• False