The Agenda Decision concludes that the receivable, contract asset and inventory recognized for the development are not qualifying assets.Ī receivable could never be a qualifying asset because it is ‘ready for use’ at the time of its initial recognition. The IFRS Interpretations Committee recently clarified in an Agenda Decision how IAS 23 applies to the construction of a residential multi-unit real estate development if the developer is selling units to customers before and during construction and recognizes the related revenue over time as it transfers control to customers. Borrowing costs related to these types of assets do not qualify for capitalization. ![]() Inventories that are manufactured or otherwise produced in a short period of time, and assets that are ready for their intended use or sale when acquired, are not qualifying assets. ![]() Qualifying assets might be, for example, manufacturing plants, intangible assets and infrastructure assets such as bridges and railways. While IAS 23 does not define ‘substantial period of time’, in our view it is a period well in excess of six months. Qualifying assets are those that necessarily take a substantial period of time to get ready for their intended use or sale. ![]() Companies apply the following step-by-step analysis to determine the borrowing costs to be capitalized. IAS 23 requires the capitalization of interest and certain other costs that are directly attributable to the acquisition or construction of ‘qualifying assets’.
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