Under AASB 123,interest incurred on a financial instrument,is able to be capitalised as part of a qualifying asset.When this is done:
A) interest is never expensed.
B) interest will be expensed as part of cost of goods sold when the asset is sold.
C) interest will be expensed as part of the accounts payable balance.
D) interest is recognised immediately.

Question

Quizplus · Accepted Answer

Under AASB 123, when interest incurred on a financial instrument is capitalized as part of the cost of a qualifying asset, it becomes part of the asset's carrying amount. Therefore, when the asset is eventually sold, the capitalized interest is expensed as part of the cost of goods sold. This approach spreads the expense of the interest over the useful life of the asset through depreciation or upon its sale, rather than recognizing the interest expense immediately when it is incurred.

Under AASB 123,interest Incurred on a Financial Instrument,is Able to Be