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IFRS guide

Capitalisation of borrowing costs

Andrew Archer Andrew Archer

IAS 23/AASB 123: Capitalisation of borrowing costs - from theory to practice

The Grant Thornton IFRS team is pleased to announce the
publication of 'Capitalisation of borrowing costs - from theory to practice'.
The International Accounting Standards Board (IASB) issued a revised version of
IAS 23 Borrowing Costs in March 2007 (AASB equivalent version AASB 123 issued
June 2007). The new standard which applies for financial periods commencing as
from 1 January 2009 (i.e. December 2009 balancers onwards) 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.