Camerata Construction borrowed €19,000,000 for 10 years at 6% specifically to modernize its operations with new equipment. The average rate of interest on Camerata's debt after considering the most recent loan was 5.5%. What rate of interest should be used for capitalizing the borrowing costs on the new equipment under IAS 23?

Question

Quizplus · Accepted Answer

IAS 23 requires borrowing costs to be capitalized using the interest rate on the specific borrowing, which in this case is 6%. The average rate of interest on all debt is not used for capitalization purposes.

Camerata Construction Borrowed €19,000,000 for 10 Years at 6% Specifically