35) Technical - Tell me bout IAS 23.

Friday, August 28, 2009



"Borrowing costs" are interest and other costs that an entity incurs in connection with the borrowing of funds.

Types of borrowing costs:

  • To be capitalised:
    - directly attribuatble to
    - the acquisition, construction or production
    - of a "Qualifying Asset (QA*)"
  • To be Expensed:
    - other than above

* Qualifying Assets (QA):

  • takes a substantial period of time
  • to get ready
  • for its intended use or sale

IAS 23 not applicable to:

  1. Cost of equity:
    - actual or imputed (including preferred capital not classified as a liability)
  2. A qualifying asset:
    - measured at fair value (e.g. a biological asset)
  3. Inventories:
    - that are manufactured, or otherwise produced,
    - in large quantities
    - on a repetitive basis


  • Conditions:
    - it is probable
    - that costs incurred will result in future economic benefits to the entity
    - and the costs can be measured reliably
  • Commencement from date when following all conditions are met:
    - expenditures is incurred for the asset,
    - it incurres Borrowing Cost; and
    - it undertakes activities that are necessary to prepare the asset for its intended use or sale.
  • Suspension of capitalisation:
    - when active development of a QA* is suspended .
    - Suspension of active development excludes:
    - - - carying out of substantial technical and administrative work
    - - - temporary delay that is a necessary part of the development of QA*
  • Cessation of capitalisation:
    - substantially all the activities of development of QA* are complete
    - if development of QA* is in parts, then each part is treated as QA*


  1. The amount of borrowing costs capitalised during the period; and
  2. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation.


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