When a project pauses, review borrowing-cost capitalization

A quiet construction site does not necessarily mean a project stopped developing. Engineering, permitting or other substantial preparation may continue elsewhere. Ask the project owner for a dated account of work performed, suspended and restarted, supported by deliverables and decisions rather than the monthly budget label.

IAS 23 requires suspension of borrowing-cost capitalization during extended periods when active development of a qualifying asset is suspended. Its guidance distinguishes those periods from substantial technical or administrative work and necessary temporary delays. Apply this review after confirming the asset and borrowing costs are within the standard's capitalization requirements.

Identify why activity changed: a funding decision, design work, unavailable materials, seasonal conditions or another cause. Record what management and contractors were actually doing during the interval. An expected delay can still require analysis; describing it as normal does not replace evidence about the process of preparing the asset.

Give the accountant schedules, engineering reports, permit submissions and contractor correspondence that explain the work. Where management paused the project indefinitely while retaining the land and financing, keep that fact visible. The existence of an outstanding loan or an unfinished construction balance does not prove that every month's interest qualifies for capitalization.

Mark the start and end of each relevant interval and identify the portion of the project affected. One facility may continue development while another is on hold. Avoid applying a companywide suspension flag simply because both projects draw from the same financing arrangement.

Ask the reviewer to distinguish temporary suspension from cessation when substantially all necessary preparation is complete. IAS 23 also addresses completed parts capable of use while work on other parts continues. Keep completion evidence with the timeline so routine trailing administration does not extend capitalization beyond the appropriate point.

Provide the approved expenditure population, borrowing information and period-by-period cost calculation. Show which amounts were capitalized, expensed or remain under review. Preserve the basis for allocating costs across active and suspended work, and have the accountant review specific and general borrowing treatment where relevant.

For an illustrative project with $9,000 of otherwise eligible monthly borrowing costs, a fully suspended two-month interval would identify $18,000 for exclusion from capitalization under that assumption. Actual calculations may involve partial periods, changing expenditures or several projects. Use the approved timeline and method rather than multiplying a budget interest figure without reconciling it to incurred costs.

Obtain the restart decision and evidence that qualifying activities resumed. Reassess the remaining project plan and connect the revised schedule to the asset records. Do not capitalize borrowing costs excluded during a genuine suspension merely to make the project's cumulative cost match an earlier forecast. Retain the prior decision and ask the reviewer to assess any correction separately if the original facts were wrong.