Wiley IFRS 2017

10Borrowing Costs

1. Introduction
2. Definitions of Terms
3. Recognition and Measurement
   1. Capitalisation of Borrowing Costs
      1. Determining the Time Period for Capitalisation of Borrowing Costs
      2. Suspension and Cessation of Capitalisation
      3. Costs in Excess of Recoverable Amounts
      4. Disclosure Requirements
4. US GAAP Comparison

Introduction

Property (such as factory buildings) is often constructed by an entity over an extended period of time, and during this interval, when the property has yet to be placed in productive service, the entity may incur interest cost on funds borrowed to finance the construction. IAS 23 Borrowing Cost provides that such cost must be capitalised to the carrying amount of the asset under construction

Sources of IFRS

IAS 23

Definitions of Terms

Borrowing costs. Interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets (defined as those taking a substantial period of time to prepare for intended use or sale) are capitalised to the cost of those assets. Borrowing costs may include interest expense calculated using the effective interest method (IAS 39), finance charges in respect of finance leases (IAS 17) or certain exchange differences arising from foreign currency borrowings.

Carrying amount (book value). The value reported for an asset or liability in the statement of financial position. For assets, this is either ...