Question

Which of the following is not a condition that must be satisfied before interest capitalization can begin on a qualifying asset?
a) Interest has been paid to the bank
b) Interest cost is being incurred
c) Expenditures for the assets have been made
d) Activities that are necessary to get the asset ready for its intended use are in progress

Answer 1

Answer:

The answer is D.

Explanation:

Cost of an asset includes the purchase price and other cost that are necessary to get the asset ready for its intended use and all these costs must be capitalized. Interest (borrowing cost) according to IAS 23( borrowing cost) states Interest directly involved in acquisition or construction or producing of qualifying assets must be capitalized i.e included in the cost of the asset.