I went through IAS 23 and answered questions over here, but I am still not sure about the capitalization of borrowing costs. Please could you advise me?
Our company purchased internet domain, this purchase was financed from 60 months loan, loan was used solely for this purchase. Bank provided us with money in 3/2016, from that time we incurred some interest costs, purchase itself happened in 5/2016 and domain is officially used from 6/2016.
If I understand it well we should capitalize only the interest costs incurred between 3/2016, ie the moment when the loan was provided, and 6/2016, when substantially all activities necessary to prepare asset are completed, is it? Therefore we should capitalize only 3 months interest costs, the remaining part (57 months interest costs) should be expensed to P&L?
Is my interpretation of IAS 23 correct? I somehow cannot understand why we cannot capitalize in time all the interest costs that will be charged over loan period as the loan was withdrawn solely for the purchase of the internet domain...