IAS 23 - Borrowing Cost

• Borrowing costs


  Should be capitalised if they relate to the acquisition, construction or production of a qualifying asset
• Qualifying asset


  An asset that takes a substantial period of time to get ready for its intended use or sale, e.g. Factory, inventories, power generation facilities
• Commencement of capitalisation


  1. Expenditure for the 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
• Specific Borrowing


  Borrowing costs which may be capitalised are those actually incurred, less any investment income on the temporary investment of the borrowings during the capitalisation period
• General Borrowing


  Where funds for the project are taken from general borrowings the weighted average cost of general borrowings is taken
• Capitalisation


  1. Borrowing costs should only be capitalised while construction is in progress

  2. Capitalisation is suspended if active development is interrupted for extended periods (temporary delays or technical/administrative work will not cause suspension)

  3. Capitalisation of borrowing costs should cease when substantially all the activities that are necessary to get the asset ready for use are complete