WorksheetsIAS 23 Borrowing Costs
Total questions: 7
Worksheet time: 5mins
Name
Class
Date
1.
Small Group is constructing an office building and is capitalizing borrowing costs in accordance with IAS 23 – Borrowing Costs. The office is almost complete; the only remaining work is to install furniture. Is Big Group allowed to continue capitalizing the borrowing costs?
a)
YES
b)
NO
2.
Which of the following is not considered a “borrowing cost” under IAS 23?
a)
Interest expense calculated by the effective interest method under IAS 39
b)
Finance charges in respect of finance leases recognised in accordance with IAS 17 Leases
c)
Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs
d)
Principal repayments on a loan for property, plant and equipment
3.
Which of the following is not a “qualifying asset” under IAS 23 – Borrowing Costs?
a)
Mass produced inventory
b)
Manufacturing plants
c)
Made to order inventory
d)
Investment property
4.
Construction of Deb and Ham’s new store began on 1 April 2009. The costs were incurred on the construction immediately. The store was completed on 1 January 2010 and brought into use following its grand opening on the 1 April 2010. Deb and Ham issued a $25m unsecured loan on 1 April 2009 to aid construction of the new store (which meets the definition of a qualifying asset per IAS 23). The loan carried an interest rate of 8% per annum and is repayable on 1 April 2012.
a)
$2,000
b)
$1,800
c)
$1,500
d)
$3,000
5.
Capitalization of the borrowing costs:
a)
Shall be suspended during temporary periods of delay.
b)
Shall be suspended only during extended periods of delays in which active development is delayed.
c)
Shall never be suspended
d)
Shall be suspended for half the period of delay.
6.
Investment income generated from loans taken in order to finance a qualifying asset should be:
a)
Deducted from borrowing costs
b)
Added to borrowing costs
c)
Added to cost of asset
d)
None of the above
7.
When the building of a qualifying asset is being completed in many parts and each part can be used independently of other parts, which may still being built, then:
a)
Capitalization should be applied for each part separately
b)
Capitalization should be applied on the eventual complete asset
c)
None of the above
100 %
