WorksheetsIFRS - Are we good to go - W4 - IAS 23 Borrowing cost
Total questions: 10
Worksheet time: 20mins
How shall an entity recognise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset?
As an equity
As an asset
An a liability
As an expense
On 1 October 2011, A Co borrowed $6m for a term of one year, exclusively to finance the construction of a new piece of production equipment. The interest rate on the loan is 6% and is payable on maturity of the loan. The construction commenced on 1 November 2011 but no construction took place between 1 December 2011 to 31 January 2012 due to employees taking industrial action. The asset was available for use on 30 September 2012 having a construction cost of $6m.
What is the carrying amount of the production equipment in A Co’s statement of financial position as at 30 September 2012?
$5,016,000
$6,270,000
$6,330,000
$6,360,000
A qualifying asset is an asset that necessarily takes __________ to get ready for its intended use or sale.
A substantial period of time
At least 6 months
At least 12 months
No more than 12 months
Which of the following cannot be a qualifying asset?
Power generation facilities
Manufacturing plants
Intangible assets
Financial assets
(i) Assets that are ready for their intended use or sale when acquired are not qualifying assets.
(ii) A Co. Ltd 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. A Co. Ltd is allowed to continue capitalizing the borrowing costs?
Which statement is true?
(i) True (ii) True
(i) False (ii) False
(i) True (ii) False
(i) False (ii) True
Which of the following is not considered a “borrowing cost” under IAS 23?
Interest expense calculated by the effective interest method under IFRS 9 - Financial Instruments
Finance charges in respect of finance leases recognised in accordance with IFRS 16 - Lease
Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs
Principal repayments on a loan for property, plant and equipment
Which of the following is not a “qualifying asset” under IAS 23 – Borrowing Costs?
Mass produced inventory
Manufacturing plants
Made to order inventory
Investment property
Capitalization of the borrowing costs:
Shall be suspended during temporary periods of delay.
Shall be suspended only during extended periods of delays in which active development is delayed.
Shall never be suspended
Shall be suspended for half the period of delay.
Investment income generated from loans taken in order to finance a qualifying asset should be:
Deducted from borrowing costs
Added to borrowing costs
Added to cost of asset
None of the above
C Co., Ltd had the following bank loans outstanding during the whole of 2018:
9% loan repayable 2019 - $15 million
11% loan repayable 2022 - $24 million
C Co., Ltd began construction of a qualifying asset on 1 April 2018 and withdrew funds of $6 million on that date to fund construction. On 1 August 2018 an additional $2 million was withdrawn for the same purpose.
Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 2018.
$472,500
$750,000
$350,000
$560,000
