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Forums › Ask CIMA Tutor Forums › Ask CIMA F1 Tutor Forums › Borrowing cost capitalisation
Hello Chris,
with regards to capitalisation of borrowing cost, on the notes as well as my study text, it states that capitalization must stop when the asset is ready for use. what happens if the asset is being used while it is still in construction or being assembled , how do you account the borrowing cost. do I pro-rata them or capitalise in full?
Hi,
We stop capitalising at the earliest opportunity, so once it is being used then the capitalisation stops.
From a real life perspective it would be very rare that an asset would be being used anyway if it was still being constructed.
Thanks