A Qualifying Asset

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

Borrowing costs are capitalised as part of the cost of a qualifying asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably. Other borrowing costs are recognised as an expense in the period in which they are incurred.

  • Depending on the circumstances, any of the following may be qualifying assets.
  • inventories that take a substantial amount of time to bring them to a saleable condition
  • Example, liquor is often required to be kept in store for more than twelve months for maturing.;
  • investments properties;
  • manufacturing plants; and
  • power generation facilities.

The following are not qualifying assets:

  • assets that are ready for their intended use or sale when acquired; and
  • inventories that are regularly manufactured, or otherwise produced in large quantities on a repeating basis, over a short period or time.
Borrowing Costs
Borrowing Costs Eligible for Capitalisation

Get industry recognized certification – Contact us