Capitalisation of borrowing costs - from theory to practice

Published by the IFRS team at Grant Thornton International Ltd.

The International Accounting Standards Board (IASB) issued a revised version of IAS 23 Borrowing Costs in March 2007. The new standard will result in a change in accounting policy for entities that applied the benchmark treatment of expensing borrowing costs under the previous standard. These entities will now need to develop procedures to calculate the amount of borrowing costs to be capitalised. Although the concept of capitalising borrowing costs is simple and familiar to many, putting that concept into practice frequently leads to questions. Many of these questions are considered in this guide. We have not attempted to cover every aspect of IAS 23, however, we believe this guide will help in addressing the problems most often encountered in practice.

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