On 1 March 20x0 Good Group took out a loan to finance the construction of a building for which construction commenced on 1 June 20x0. The construction was completed on 31 January 20x1. The building was brought to use on 1 June 20x1.
What is the period over which borrowing costs relating to the project should be capitalized?
1 March 20x0 – 1 June 20x1
1 June 20x0 – 1 June 20x1
1 March 20x0 – 31 January 20x1
1 June 20x0 – 31 January 20x1
Borrowing costs related to the project should be capitalized in accordance with the principles outlined in IAS 23, Borrowing Costs. According to these principles, borrowing costs that are directly attributable to the cost of assets under construction should be capitalized from the time when the asset's construction begins until it is ready for its intended use. In this case, the construction of the building started on 1 June 20x0 and was completed on 31 January 20x1. Therefore, the period over which borrowing costs should be capitalized is from 1 June 20x0 to 31 January 20x1.
So, the correct period is: 1 June 20x0 – 31 January 20x1.
