(Summary) Ind AS 23

Borrowing costs

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.

  1. Borrowing Costs
  2. 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

XXX

(XXX)

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:

  1. It incurs expenditures for the asset; AND
  2. It incurs borrowing costs; and
  3. 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.
  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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