Capitalisation of borrowing costs should commence when

1. Expenditure for acquisition, construction or production of a qualifying asset is being incurred;

2. Borrowing costs are being incurred;

3. Activities that are necessary to prepare the asset for its intended use or sale are in progress.

Which of the following alternatives is correct ?

A. 2 and 3

B. 1, 2 and 3

C. 1 and 3