Borrowing Costs
This project is complete. The Board published a revised IAS 23 in March 2007. Information on the project is retained for background reading purposes only.
IAS 23 provides guidance on the accounting treatment for borrowing costs. Borrowing costs are interest and other costs incurred by an entity in connection with the borrowing of funds.
The Board’s objectives in this project are:
(a) This project is part of the Short-term Convergence project with the US Financial Accounting Standards Board (FASB). The purpose is to reduce differences between IFRSs and US generally accepted accounting principles (US GAAP) that can be resolved in a relatively short time and can be addressed outside major projects.
(b) The objective of this short-term convergence project is to amend IAS 23 Borrowing Costs, by removing the main difference between US GAAP and IAS 23. This will be done by requiring the capitalisation of borrowing costs, to the extent they are directly attributable to the acquisition, production or construction of a qualifying asset.[1] The existing option of immediate recognition of those borrowing costs as an expense will be removed.
[1] Assets eligible for capitalisation are those that need a period of time to get ready for their intended use or sale and are denominated by IAS 23 and SFAS 34 as qualifying assets.
Is this project part of the Memorandum of Understanding?
The MoU sets out a Roadmap of Convergence between IFRSs and US GAAP 2006-2008. The purpose of the Roadmap is to remove the need for the reconciliation requirement for non-US companies that use IFRSs and are registered in the United States of America. The intention is to issue converged standards, the contents and effective dates of which to be determined after taking full account of comments received in response to the Exposure Drafts.
Click here for more information on the MoU.
The progress expected to be achieved by 2008 is to complete a final standard with the amendments to achieve the objectives set out above. The Board published a revised IAS 23 in March 2007, thus achieving the milestone set in the MoU.
Due process steps completed
Stage 1: Setting the agenda
The project was added to the agenda in April 2004 as part of the short-term convergence project. Work commenced in October 2005.
Stage 2: Project Planning
This project is being conducted by the IASB only. As noted above, the scope of this project is limited to amendments related to the Board’s decision in the short-term convergence project. The Board has not reconsidered all of the requirements in IAS 23 and the project is part of the short-term convergence project, therefore no working group was considered necessary for this project.
Stage 3: Development and publication of a discussion paper
A discussion paper is not a mandatory step in the IASB Due Process Handbook. A discussion paper was not considered necessary for this project because the objective of the project is to reduce differences between IAS 23 and SFAS 34, not to develop a new approach to accounting for borrowing costs.
Stage 4: Development and publication of an exposure draft
An Exposure Draft was published on 25 May 2006 for public comment (click here for a copy of the exposure draft) . The Board invited comments on the Exposure Draft by 29 September.
Stage 5: Development and publication of a revised Standard
The Board published a revised IAS 23 in March 2007.
Further information:
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Click here to download the full project summary.
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Click here for the Apendix to the project summary.
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Click here for the Exposure Draft of Proposed amendments to IAS 23 Borrowing costs (comments to be received by 29 September 2006)
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Click here to view the Comment Letters solicited on the Exposure Draft.
- The revised IAS 23 is available online for eifrs subscribers and in hard copy from the IASCF publications shop.
Project contact: