Can I capitalize overdraft interest incurred on purchasing capital assets?

Question

Our company recently purchased some machinery for for around $1.3M. We purchased this by paying the supplier by cheque. However due to this transaction we have incurred $5623 as overdraft interest. The current account went overdrawn purely because of this transaction. Can I capitalize this amount to the cost of the asset?

Answer 1

Yes. If you can directly attribute your overdraft interest to the purchase of your asset then you can capitalize this interest as per IAS 23