IAS 23 – BORROWING COST
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Definitions


Borrowing Cost: Interest and other cost incurred by the entity in connection with borrowing funds.


Qualifying Asset: The asset which necessarily takes a substantial period of time to get ready for its intended use or sale.


What does Borrowing Cost include?

Interest on overdraft , Short term loan, Long term loan.
Amortization of discount or premium.
Amortization of ancillary cost
Finance charge in connection with lease.
Exchange rate difference arising from foreign currency borrowing.


When shall Capitalisation Commence?


-Expenditure are incurred for the asset

-Borrowing Cost are being incurred.

-Activities that are necessary to construct the asset are in progress.


When to suspend capitalisation?


During extended period in which active development is interrupted


When to cease capitalistion ?


When all the activities necessary to prepare the Qualifying asset for its intended use or sale are complete

When the asset is completed in parts and each part can be used separately then borrowing cost shall cease to capitalise when all the activities to prepare that part of asset are complete


Disclosures

-Accounting Policy adopted.
-Amount of Borrowing cost Capitalised during the period.
-Capitalisation Rate (in case of General Borrowing)