Page 187 - F1 Integrated Workbook STUDENT 2018

Non-cuurrent asssets – IAAS 23, IAAS 38 & IIAS 36

Exxampple 1

On 01/01/X0 Aseco beggan to consstruct a supermarkett which hass an
estimated useeful life of 440 years. TThey consttructed a bbuilding at aa cost of $$25
milllion and fixxtures and fittings at aa cost of $$9 million. In addition they had tto
payy legal costts amountiing to $1 mmillion. Thee construction of the ssupermarkket
wass completeed on 30/099/X0 and bbrought into use on 001/01/X1.

In oorder to complete thiss project AAseco had to borrow $$20 millionn on 01/01//X0.
Thee loan carrried interesst at 10%. I It was repaaid on 30/006/X1 afterr a successsful
six months off operation.

Callculate thee total amount that can be caapitalised as cost foor propertyy,
plaant and equipment in respect of this deevelopmennt for the yyear endinng
31//12/X0.

Sollution

Thee total amoount that caan be capitalised in pproperty, plant and eqquipment aat
31//12/X0 is:

$
Building and llease 25,000,0000
Fixttures and ffittings 9,000,0000
Leggal costs 1,000,0000
Inteerest capitaalised
($220,000,000 × 10% × 99/12) 1,500,0000
–––––––––
36,500,0000

Notte: the inteerest can only be cappitalised forr 9 months from Januuary to
Sepptember wwhen the assset is commpleted.

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