IAS 23 states: "The activities necessary to prepare the asset for its intended use or sale encompass more than the physical construction of the asset. They include technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits prior to the commencement of the physical construction. However, such activities exclude the holding of an asset when no production or development that changes the asset’s condition is taking place. For example, borrowing costs incurred while land is under development are capitalised during the period in which activities related to the development are being undertaken. However, borrowing costs incurred while land acquired for building purposes is held without any associated development activity do not qualify for capitalisation".
Doesn't the first part of this paragraph contradict the last? The first part states that the process of obtaining a permit prior to the commencement of the physical construction is considered a "necessary activity". However, the last part states that " land acquired for building purposes is held without any associated development activity do not qualify for capitalization". This is clearly a contradiction since an entity cannot begin developing a land without first obtaining a permit.
