(Summary) Ind AS 23
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense.
An entity shall apply this Standard in accounting for borrowing costs.
- Borrowing Costs
- Qualifying Asset
Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
- Capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
- Recognize other borrowing costs as an expense in the period in which it incurs them.
- Capitalise the following amount:
| Actual Borrowing Cost incurred
(-) Investment income on temporary investment on those borrowing
|Borrowing Cost Eligible for Capitalisation||XXX|
- When entity borrows funds generally and uses them for the purpose of obtaining a qualifying asset
|Determine amount of borrowing costs → By applying capitalisation rate.
Capitalisation rate: Weighted average of borrowing costs.
The commencement date for capitalisation is the date when the entity first meets all of the following conditions:
- It incurs expenditures for the asset; AND
- It incurs borrowing costs; and
- It undertakes activities that are necessary to prepare the asset for its intended use or sale.
- Suspend capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.
- When an entity completes the construction of a qualifying asset in parts and each part is capable of being used while construction continues on other parts,
- Cease capitalising borrowing costs when entity completes substantially all the activities necessary to prepare that part for its intended use or sale.
- The amount of borrowing costs capitalised during the period; and
- The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation.