IAS 23

In this lesson

1. 0:00 Understanding borrowing costs and qualifying assets
2. 0:43 When to capitalise and suspend borrowing costs
3. 1:41 Specific versus general borrowing treatment
4. 2:39 Disclosing borrowing costs in financial statements

About this lesson

The standard applies to qualifying assets—those taking substantial time to construct or prepare for use, such as factories or property developments. You capitalise borrowing costs only when three conditions are met: expenditure on the asset is being incurred, activities to prepare it are actively underway, and borrowing costs themselves are being incurred. Capitalisation pauses if development is interrupted and stops once the asset is substantially complete and ready for use. The treatment differs between specific and general borrowings. For specific borrowings taken out to finance a particular asset, you capitalise actual interest payable minus any income from temporarily investing unused funds. For general borrowings, you capitalise based on the expenditure multiplied by the weighted average borrowing cost rate across all the entity's general borrowings. Finally, your financial statements must disclose both the amount of borrowing costs capitalised during the period and the capitalisation rate applied.

Duration: 3m