IAS 23 borrowing costs

Question 1

borrowing costs

Answer 1

borrowing costs are defined as interest and other costs that an entity incurs in connection with the borrowing of funds

Question 2

recognition

Answer 2

borrowing costs should be capitalised if they relate to the acquisition, construction or production of a qualifying asset

Question 3

qualifying asset

Answer 3

asset that takes a substantial period of time to get ready for its intended use or sale

Question 4

capitalisation

Answer 4

• borrowing costs should only be capitalised while construction is in progress

Question 5

commencement of capitalisation

Answer 5

• expenditure for the asset are being incurred.
• borrowing costs are being incurred
• activities that are necessary to get the asset ready for use are in progress

Question 6

specific borrowings

Answer 6

amount to be capitalised is the interest on that loan less income earned on the temporary investment of the borrowings.