Skip to content

CFA Level I · CFA Level I Exam · Analysis of Long-Term Assets

Under IFRS, which of the following borrowing-related costs would most likely be capitalized?

Interest on a loan used to build a facility that takes two years to complete would be capitalized. IFRS requires capitalizing borrowing costs on qualifying assets during the construction period. Interest on routine inventory funding or incurred after the asset is ready for use is expensed.

  1. AInterest on a loan used to build a facility that takes two years to completeCorrect
  2. BInterest on a loan used to fund routine inventory purchases
  3. CInterest on a loan used to build a facility, incurred after construction is complete

Explanation

IAS 23 requires capitalizing borrowing costs directly attributable to acquiring or constructing a qualifying asset, one that takes a substantial time to get ready for use. Routine inventory is not such an asset, and interest after completion is expensed because the asset is ready for use.

Did you get it right without looking?

One question tells you little. A timed set on Analysis of Long-Term Assets shows your real accuracy, how long you take and where you lose marks.

Practise Analysis of Long-Term AssetsFree diagnostic mock

More Analysis of Long-Term Assets questions