IND AS 23 prescribes the accounting treatment for borrowing costs. It states that borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset should be capitalized as part of the cost of that asset, while other borrowing costs are recognized as an expense. A qualifying asset is defined as an asset that takes a substantial period of time to get ready for its intended use or sale. The standard provides guidance on capitalizing eligible borrowing costs, suspending and recommencing capitalization, and required disclosures. It aims to outline a principles-based approach to borrowing cost treatment.

1. IND AS 23
BORROWING COSTS
Presented By:
CA. NIRMAL GHORAWAT
B. Com (Hons), ACA

2. OBJECTIVE
Prescribe the Accounting Treatment for
Borrowing Costs.
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3. CORE PRINCIPLE
Borrowing costs that are
directly attributable to the
acquisition, construction
or production of a
qualifying asset form part
of the cost of that asset.
Other borrowing costs are
recognised as an expense.
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4. SCOPE
Accounting for Borrowing Costs
Exclusions :
Actual or Imputed Cost of Equity (including
Preferred Capital not classified as a
Liability).
Qualifying Asset is measured a fair value
e.g. Biological Assets IND AS 41
Agriculture
Inventories that are manufactured or
produced in large quantities on a repetitive
basis.
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5. DEFINITIONS
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BORROWING
COSTS (BC)
QUALIFYING
ASSETS (QA)
INTEREST + OTHER COSTS incurred
by an entity in connection with the
borrowing of funds.
is an asset that NECESSARILY takes
a SUBSTANTIAL period of time to get
ready for intended use or sale.

6. RECOGNITION – BORROWING COSTS
BC DIRECTLY attributable to the
Acquisition, Construction or
Production of QA shall be
CAPITALISED as part of the cost
of that asset.
Other BC shall be recognised as
an Expense in the period in which
they are incurred.
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7. CAPITALISATION OF BORROWING COSTS
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Funds are borrowed
SPECIFICALLY for the
purpose of obtaining a QA
Funds are borrowed GENERALLY
and used for the purpose of obtaining
a QA
ACTUAL BC incurred on that
borrowing during the period
LESS any income on
temporary investment of those
borrowings
BC shall be determined using a
CAPITALISATION RATE to the
expenditure on that asset.
Capitalisation Rate is the
WEIGHTED AVERAGE of the BC of
the entity that are outstanding during
the period – OTHER than Borrowings
made SPECIFICALLY for the
purpose of obtaining a QA.
Amount of BC Capitalised during a period shall NOT EXCEED the
ACTUAL amount of BC incurred during the year.

8. IMPAIRMENT
If the Carrying Amount or Expected
ultimate cost of QA EXCEEDS its
Recoverable Amount of Net
Realisable Value (NRV) – THEN
Carrying Amount is WRITTEN
DOWN- as per IND IAS 36 on
Impairment of Assets.
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9. COMMENCEMENT, SUSPENSION & CESSATION
OF CAPITALISATION
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COMMENCEMENT SUSPENSION CESSATION
(a) Expenditure for the
asset are being
incurred;
(b) BC are incurred;
(c) Active Development
i.e., activities that are
necessary to prepare
the asset for its intended
use or sale are in
progress.
During Extended
periods in which Active
Development is
INTERRUPTED.
Read ABNORMAL
DELAYS.
Substantially all the
activities necessary to
prepare the asset for its
intended use or sale are
in progress.

10. COMPLETION IN PARTS
When an entity completes the
construction of a qualifying asset in
parts and each part is capable of being
used while construction continues on
other parts, the entity shall cease
capitalising borrowing costs when it
completes substantially all the activities
necessary to prepare that part for its
intended use or sale.
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11. DISCLOSURE
The amount of Borrowing
Costs capitalised during
the period;
The Capitalisation Rate
used to determine the
amount of borrowing costs
eligible for capitalisation.
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12. SIGNIFICANT DIFFERENCES
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13. SIGNIFICANT DIFFERENCES
IFRS IND AS AS
Literature IAS 23 –
Borrowing Costs
IND AS 23 –
Borrowing Costs
AS 18 –
Borrowing Costs
Method of
Accounting
Capitalise BC
on Qualifying
Assets Or
BC Expensed
as Incurred
Capitalise BC
on Qualifying
Assets
Capitalise BC
on Qualifying
Assets Or
BC Expensed
as Incurred
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