IAS 23 Borrowing Costs
A qualifying asset necessarily takes a substantial period to get ready for its intended use or sale. Other borrowing costs are recognised as an expense. Start, suspend and stop capitalisation according to the required conditions, and apply different methods to specific and general borrowings. Deduct investment income earned on temporary investment of specific borrowings when calculating eligible costs.
Worked example
A specific construction loan costs $30,000 in eligible-period interest and earns $2,000 on temporarily invested funds. Assuming all conditions are satisfied, capitalise $28,000.
Common mistake
Capitalising all interest on every loan, or continuing capitalisation after substantially all activities needed to prepare the asset are complete.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |