WorksheetsTopic 3: Borrowing Cost
Total questions: 8
Worksheet time: 4mins
What is the core principle of borrowing costs according to MFRS 123?
All borrowing costs are recognized as expenses
Borrowing costs directly related to qualifying assets are capitalized
Borrowing costs are not considered in financial statements
Borrowing costs are only applicable to inventories
What is considered a qualifying asset?
An asset that is ready for immediate use or sale
An asset that takes a substantial period of time to get ready for use or sale
An asset that is not tangible
An asset that is not included in financial statements
When should an entity begin capitalizing borrowing costs?
When it incurs expenditures for the asset
All of the above
When construction of the asset has started
When it incurs borrowing costs
When should an entity cease capitalizing borrowing costs?
When the entity decides to stop
When the construction is halfway done
When all activities are complete
When there is interruption in the activities
What is the purpose of determining the amount of borrowing costs eligible for capitalization?
To increase the profit margin of the entity
To accurately reflect the cost of the asset in financial statements
To avoid recognizing any borrowing costs
To reduce the overall cost of the asset
What is the significance of investment income in relation to borrowing costs?
It is considered a separate expense
It increases the amount of borrowing costs eligible for capitalization
It reduces the amount of borrowing costs eligible for capitalization
It has no impact on borrowing costs
Which of the following are types of borrowing? (You can answer more than one item)
Alternate borrowing
Specific borrowing
Pool borrowing
General borrowing
What is the capitalization rate?
The weighted average of borrowing costs applicable to outstanding borrowings
The average interest rate in the market
The fixed rate set by the entity
The prime lending rate of the central bank
