How Should Borrowing Costs Relating to an Asset Being Constructed

question 19

Multiple Choice

How should borrowing costs relating to an asset being constructed over a substantial period of time be treated in the accounts?

• A) Expensed as incurred.
• B) Capitalised and amortised over the period of the construction of the asset.
• C) Accrued and amortised over the period of the loan.
• D) Capitalised as part of the cost of the asset.
• E) None of the given answers.

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Definitions:

IFRS

International Financial Reporting Standards, a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

GAAP

Generally Accepted Accounting Principles, a set of rules and standards designed to improve the clarity, consistency, and comparability of financial reporting across industries in the United States.

Deferred Income Taxes

Taxes owed for the current period but not yet required to be paid, due to differences between financial accounting and tax reporting.