IAS 23 Borrowing Costs

Table of Contents
Table of Contents
SCOPE
DEFINITIONS
CAPITALISATION
DISCLOSURES
CONTACTS

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SCOPE

Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of that asset.

Other borrowing costs are recognised as expenses when accrued.

Capitalisation of borrowing costs on qualifying assets is not optional.

DEFINITIONS

Borrowing costs
Interest and other costs associated with borrowing funds and would have been avoided if the expenditure on the qualifying asset hadn’t occurred. This may include:

Interest calculated using the effective interest rate (IFRS 9)
Interest on lease liabilities (IFRS 16)
Exchange rate differences arising on funding borrowed, to the extent that they are considered an adjustment to borrowing costs

Borrowing costs can arise from two different sources:

Specific borrowings that are directly associated with the acquisition of the qualifying assets
General borrowings, that a proportion of them are used for the acquisition of the qualifying assets. A proportion of such borrowing cost can be capitalised using the weighted average of such borrowing costs

Qualifying asset
A qualifying asset is any asset that necessarily takes a substantial period of time to get ready for intended use. This requires construction, or otherwise production of the asset. This may include:

Property, plant, and equipment
Inventory
Investment properties
Bearer plants
Intangible assets

A substantial period of time is not defined.

Activities that may be included in preparing the qualifying asset include both construction and technical and administrative work required before construction commences.

CAPITALISATION

Commencement
Capitalisation commences when the entity first

Incurs expenditure on the qualifying asset
Incurs borrowing costs
Undertakes activities to prepare the qualifying asset

Suspension
Capitalisation is suspended during extended periods when no active development is being undertaken.

Cessation
Capitalisation ceases when substantially all the activities required to prepare the qualifying asset for its intended use or sale are complete.

DISCLOSURES

Entities are required to disclose the amount of borrowing costs capitalised during the period and the associated interest rate.

CONTACTS

BOAZ DAHARI Moore Israel [email protected]	KRISTEN HAINES Moore Australia [email protected]	TAN KEI HUI Moore Malaysia [email protected]
CHRISOF STEUBE Moore Singapore [email protected]	NEES DE VOS Moore DRV [email protected]	TESSA PARK Moore Kingston Smith [email protected]
EMILY KY CHAN Moore CPA Limited [email protected]	PAUL CALLAGHAN Moore Oman [email protected]	THEODOSIOS DELYANNIS Moore Greece [email protected]
IRINA HUGHES Johnston Carmichael [email protected]	SAHEEL ABDULHAMID Moore JVB LLP [email protected]

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