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Hi,
in determining whether to capitalize the interest rates on the loan borrowed to finance the construction of an asset, the asset should take some time to construct. How long is this “some time”? Is it a period longer than a year?
suppose a loan is taken in the year and the asset is due to be completed within the year(probably after 10 months), is it ideal to expense finance costs?It doesn’t have to be more than a year but consider that individual IFRSs only apply if material.
Rather than building high-rise office blocks over several years, a company might build individual houses completed in several months. If the business has loan finance the cost of borrowing tied up in inventory is likely to be material and management would most likely want to capitalise interest, but misapplication could result in under or overstatement.
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