Which accounting framework allows for the capitalization of borrowing costs related to inventories?

The capitalization of borrowing costs related to inventories is permitted under both International Financial Reporting Standards (IFRS) and Accounting Standards for Private Enterprises (ASPE).

Under IFRS, specifically according to IAS 23, borrowing costs that are directly attributable to the acquisition of a qualifying asset, such as inventory that requires a substantial period of time to prepare for its intended use or sale, can be capitalized. This means that the costs of loans taken out to finance the inventory can be included in the overall cost of that inventory until it is completed and ready for sale, reflecting a more accurate representation of the total investment in that inventory.

Similarly, ASPE allows for the capitalization of borrowing costs on qualifying assets when these costs are directly attributable to the acquisition of the asset. This consistency between ASPE and IFRS in allowing the capitalization of borrowing costs related to inventory helps to align financial reporting practices, ensuring that companies reflect the true economic costs associated with producing their goods.

Therefore, the correct answer indicates that both accounting frameworks support the capitalization of borrowing costs related to inventories, allowing an accurate depiction of both the asset's cost and the company's financing efforts in aligning with the financial performance.