IAS 23 - Borrowing Costs

On what amount is the interest / borrowing cost being calculated? Calculate the interest for the period based on the amount borrowed and then allocate that calculated amount on the basis of, probably, amounts paid or expenses incurred (or stage reached or whatever is given in the question as the indicator for that allocation) Ok?

Dear Sir, I would like to ask in reality, what basis is appropriate? Thanks a lot

Probably based on amounts paid, but I don't really know

Dear Sir, Thank you so much Son

You're welcome

Dear sir, please how do i go about this Question Alpha took a loan for $3600,000 on 1 february 2001 to finance the construction cost of its new offices. interest paid was at 5%throughout the year. the initial batch of materials were purchased and and delivered at 1 march 2001 and construction began on that day. construction and decoration was completed on 1 nov 2001, although the offices were not occupied until 1 Dec 2001 bank interest of $15000 was earned on investment of the proceeds of the loan before it was all spent. what is the amount of borrowing cost that should be capitalised in accordance with IAS 23 for the year ended 31st dec 2001?

The appropriate time period is from 1 March to 31 October = 8 months So 5% x $3,600,000 for 8 months = ????? Deduct the amount of interest earned ... probably time apportioned to exclude the interest earned during the month of February And that should give you the answer!

thank you

You're welcome .... did you arrive at the correct answer?

Sir, regarding this same question: “Alpha took out a loan for $3,600,000 on 1 February 20X1 to finance the construction cost of its new offices. Interest was paid at 5% throughout the year. The initial batch of materials were purchased and delivered on 1 March 20X1 and construction began on that day. Construction and decoration was completed on 1 November 20X1, although the offices were not occupied until 1 December 20X1. Bank interest of $15,000 was earned on investment of the proceeds of the loan before it was all spent. What is the amount of borrowing costs that should be capitalised in accordance with IAS 23 for the year ended 31 December 20X1 (performing interest calculations to the nearest month)?” I have calculated the borrowing cost as $3,600,000 x 5% x 8/12 months = $120,000. I am uncertain about the time apportionment for the investment income, which I have calculated as $15,000 x 8/9 months = $13,333. The borrowing cost to be capitalised that I got is $120,000 - $13,333 = $106,667. Is this correct?

Hi, Yes, I believe what you have done is correct. Thanks

Hello, need help on this question Which of the following would be qualify as a borrowing cost as defined in IAS 23 Borrowing costs? 1) Premium on redemption of preference share capital 2) Discount in the issue of convertible debt 3) Interest expense calculated using the effective interest rate 4) Finance charges related to finance lease A. 1, 2 and 3 only B. 2, 3 and 4 only C. 1 and 4 only D. All four

Hi, What do you believe the answer to be and why? Let me know and I can look to help you. Thanks