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Instructions:
Discussion Paper: IAS 23 Borrowing Costs
1. According to IAS 23, what is the cost of borrowing?
A. The price of a share of stock.
B. The value of equity shares based on their implied cost.
C. Preferred stock dividends are not accounted for as a liability.
D. Preferred stock dividends are not treated as liabilities.
E. Financing charges for finance leases that are recognized under IAS 17 Leases.
2. How should financing costs directly related to the acquisition, construction, or production of a qualified asset be recorded?
As a shareholder,
B. As a valuable resource
A liability is a third type of risk.
D. As a financial liability
3. A qualifying asset is one that must undergo in order to be ready for use or sale.
A. A span of time that is long.
A minimum of six months
C. For a period of at least a year
D. A period of no longer than 12 months is acceptable.
4. Which of the following cannot be used to qualify for a loan?
A. Generators of electricity
Plants that produce goods.
Intangible assets are the assets that cannot be seen or touched.
D. monetary resources
E. Commercial real estate
5. Qualifying assets are those that are ready to use or sell when they are purchased.
True (A).
True
6. Aurora Ltd is building a new gold mine. The mine is expected to be ready for operation in at least two years, according to the business. It is also undergoing a two-month upgrade of infrastructure at one of its current mines. Can IAS 23 be used to classify the improvement and the new mine as qualifying assets?
A. The upgrade is the only asset that qualifies as a qualifying asset.
B. The new mine is the only asset that qualifies as a qualifying asset.
C. It is dependent on the entity’s borrowing cost accounting policy.
D. Both the new mine and the upgrade can be considered qualified assets.
7. A cable business is constructing a cable network that will serve a large number of franchise areas. Each area’s building is carried out in a consecutive manner. The network will be ready for usage in each franchise area after the construction is completed. The cost of the spending is covered by a general pool of borrowings. When should the capitalization of borrowing expenses for a specific franchise area come to an end?
A. When there are no more financial resources accessible.
B. When that particular franchise region has been completed.
C. When nearly all of the franchise regions have been completed.
D. At the conclusion of the project.
On July 1, 2018, Mille Construction borrowed 50.000 to build a qualifying asset. The company’s fiscal year ends on December 31, 2018. The borrowings are subject to a 9% annual interest rate. On July 1, 2018, a 45.000 expense was recorded, and the construction was still proceeding as of December 31, 2018. Surplus monies were put to work at a rate of 7% per year. What percentage of borrowing costs should Millennium Construction capitalize (for the sake of simplicity, ignore the effect of compounding in calculating interest)?
The total amount of borrowing costs for the fiscal year ending December 31, 2018 is….. Surplus monies were invested, and interest income of…….. was received. As a result, the amount of borrowing cost to be capitalized is…..
9. VERO CRUISE is constructing a new cruise ship that is expected to take at least three years to finish. After reading the following material, choose the right statements from the following list:
Engineers began designing the crisis liner on January 1, 2018.
On July 1, 2018, prototype scale models were made to determine which design was the best.
The cruise liner’s construction began on January 1, 2019.
A. On January 1, 2018, borrowing costs would be capitalized.
B. On January 1, 2019, borrowing costs would be capitalized.
C. On July 1, 2018, the capitalization of borrowing expenses would begin.
D. Under IAS 23, engineers’ drawings are not considered a necessary activity for preparing the asset for its intended use.
10. Modern Company has spent the last two years developing computer software that will be used internally and/or sold to potential buyers. The group capitalized development costs incurred throughout the development period and recognized an intangible asset of 1 million in accordance with IAS 38. Should Modern Company capitalize borrowing expenses as part of the carrying value of the internally generated intangible asset if it borrows money to fund software development?
Yes, because intangible assets that take a long time to develop qualify as qualifying assets.
B. No, because qualifying assets can only be bought tangible assets.
C. No, because intangible assets are not considered qualifying assets under IAS 23.
D. It depends on whether the program will be utilized internally or marketed to potential customers.
RUBRIC |
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Excellent Quality 95-100%
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Introduction
45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned. |
Literature Support 91-84 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned. |
Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met. |
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Average Score 50-85% |
40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided. |
83-76 points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration. |
52-49 points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met. |
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Poor Quality 0-45% |
37-1 points The background and/or significance are missing. No search history information is provided. |
75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration. |
48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met |
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Discussion Paper on IAS 23 Borrowing Costs |
Discussion Paper on IAS 23 Borrowing Costs