The core principle of the standard is that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset, i.e. such costs are capitalised. All other borrowing costs are recognised as an expense.

The standard specifically excludes qualifying assets measured at fair value, for example biological assets and inventories which are produced in large quantities on a repetitive basis. The thought behind these exclusions was as follows.

The determination of fair value, as defined under Chapter 25 and thus the measurement of the asset, is not affected by the amount of borrowing costs incurred. Thus, there is no need for specific requirements for accounting for the borrowing cost; they are simply treated as all other borrowing costs. The excluding of inventories produced in large quantities on a repetitive basis was an acknowledgement that it would be difficult for preparers to collect the information required to monitor and allocate the borrowing costs to inventory items produced in such a manner. The Board determined that the cost would ...

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