Question

After January 1, 2009, in order to be consistent with IASB Standards, U.S. GAAP now requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be:

a) Capitalized
b) Expensed immediately
c) Ignored
d) Amortized

Answer 1

After January 1, 2009, U.S. GAAP requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be capitalized.

Step-by-step explanation:

After January 1, 2009, in order to be consistent with IASB Standards, U.S. GAAP now requires that borrowing costs on assets that require a substantial period to bring them to a marketable condition be:

1. Capitalized

This means that the borrowing costs are added to the cost of the asset and recorded as an increase in its value. By capitalizing the borrowing costs, they are then amortized (spread) over the useful life of the asset through depreciation or amortization expense in the income statement. The rationalization behind this is to reflect the true cost of the asset while it is being prepared for its intended use or sale.