Ind AS 20: Borrowing Costs#
Scope#
Applies to borrowing costs of entities that:
- Capitalize borrowing costs on qualifying assets
- Recognize borrowing costs as expense
Definition#
Borrowing costs include:
- Interest expense on borrowings
- Finance charges on finance leases
- Exchange differences on foreign currency loans (extent regarded as adjustment)
Capitalization#
Qualifying Assets#
Assets that take substantial time to prepare for intended use:
- Construction of buildings
- Manufacturing plants
- Investment properties under development
- Bearer plants
Start of Capitalization#
When:
- Expenditure incurred
- Borrowing costs incurred
- Activities to prepare asset commenced
Suspension#
- When active development suspended
- Resume when activities resume
Cessation#
- When asset substantially ready for intended use
- No further capitalization
Capitalization Rate#
Capitalization Rate = Weighted Average Interest Rate
Calculation#
- Exclude specific borrowings used for specific assets
- Capitalize actual borrowing costs incurred
Recognition#
- Capitalize borrowing costs on qualifying assets
- Other borrowing costs expensed as incurred
Disclosure Requirements#
- Accounting policy for capitalization
- Capitalization rate used
- Amount of borrowing costs capitalized
- Amount expensed as interest