IAS 23 Borrowing Costs

IAS 23 Borrowing Costs, an accounting standard adopted by the International Accounting Standards Board that dictates how companies must account for interest and other financing costs. The core principle mandates that borrowing costs directly related to the creation of a qualifying asset—one that takes a substantial period of time to prepare for use or sale—must be capitalized as part of the asset's cost, rather than immediately expensed. The standard details strict rules for the commencement, suspension, and cessation of capitalisation, specifying that this process must begin when expenditures, borrowing costs, and preparatory activities are all underway. Significantly, a 2007 revision eliminated the option for immediate expensing, reinforcing the rule that eligible borrowing costs must be capitalised to the asset's value.