IAS 23 BORROWING COSTS

This standard builds on IAS 16 PROPERTY PLANT AND EQUIPMENT.(http://mwalimuwetuaccounting.blogspot.com/2010_10_01_archive.html)

IAS 16 requires that all costs incurred that are incidental to bringing the asset to the location and condition that management intended should be capitalised.

The question is; supposing that a loan had to be taken in order to finance the acquisition of an asset, would the interest expense on the loan be capitalised?
Per IAS 16, if the asset couldn't have been acquired without the loan, then the loan interest must be capitalised.

IAS 23 builds on the concept further; it says that interest costs for a "qualifying asset" must be capitalised. A qualifying asset is an asset that takes a LONG TIME to get ready for its intended use or sale. As such, it normally refers to assets that are being constructed instead of assets that are being bought in a sale transaction.

In case only part of a loan is used in constructing an asset, then the interest to be capitalised should be proportionate.

For borrowing costs to be capitalised, the following conditions must be met;
a)the borrowing costs are being incurred
b)expenses are being incurred
c)construction activities are going on

in case construction is suspended, the interest for the period that construction is suspended is expensed.In addition, if construction is over, then any subsequent interest till the date of loan repayment should be expensed.