IPSAS Explained: A Summary of International Public Sector Accounting Standards, 2nd Edition

IPSAS 5: Borrowing Costs

Objective

IPSAS 5 governs the accounting treatment for borrowing costs. In general, it requires borrowing costs to be expensed immediately, but does permit, as an allowed alternative treatment, the capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.

The IFRS on which the IPSAS is based

IAS 23, Borrowing Costs

Content

Principal definitions

Borrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of funds. Borrowing costs may include

Interest on overdraft facilities or short-term and long-term borrowings;

Amortization of discounts or premiums relating to borrowings;

Amortization of ancillary costs incurred in connection with the arrangement of borrowings;

Finance charges for finance leases; and

Exchange differences arising from foreign currency borrowings to the extent that they qualify as an adjustment to interest costs.

A