Indian Accounting Standard (Ind AS) 23 Summary
Indian Accounting Standard (Ind AS) 23, Borrowing Costs is applied in the accounting for borrowing costs. Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds. These include:
– Interest expense calculated using the effective interest method as described in Ind AS 109, Financial Instruments;
– Interest in respect of lease liabilities recognised in accordance with Ind AS 116, Leases1 and
– Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
The standard requires that borrowing costs directly attributable to the acquisition, construction or production of a ‘qualifying asset’ are included in the cost of the asset when it is probable that they will result in future economic benefits to the entity and the costs can be measured reliably.
Borrowing costs are reduced by interest income from the temporary investment of borrowings.
Capitalisation begins when an entity meets all of the following conditions:
– Expenditure for the asset is being incurred
– Borrowing costs are being incurred and
– Activities that are necessary to prepare the asset for its intended use or sale have commenced.
Capitalisation ceases when the activities necessary to prepare the asset for its intended use or sale are substantially complete.