Borrowing costs
Borrowing costs are interest and other costs incurred in connection with borrowing funds. IAS 23 generally requires directly attributable borrowing costs of a qualifying asset to be capitalised, with other borrowing costs recognised as an expense, subject to its requirements and exceptions. Auditors examine eligibility, timing and calculation.
Worked example
A business constructs a qualifying building and capitalises eligible interest incurred during construction; the auditor tests the dates and interest calculation.
Common mistake
Do not capitalise every interest cost merely because the entity owns a non-current asset.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |