Indian Accounting Standard 23: Borrowing Costs

The cost of borrowing money, including interest payments and any exchange rate differences, that is directly related to the acquisition, construction, or production of an asset being built or developed. This cost can be included as part of the asset's cost.

The cost of borrowing money used to finance a project, such as an acquisition, construction, or production, is added to the cost of the asset being built or developed. This is done if certain conditions are met.

An asset that is being built or developed, and qualifies to have borrowing costs capitalized as part of its cost.

The difference between the interest cost incurred on a foreign currency loan and the interest cost that would have been incurred if the loan had been taken in the local currency.

The interest cost that would have been incurred on a loan if it had been taken in the local currency.

The interest cost incurred on a foreign currency loan, taking into account the exchange rate at the time the loan was obtained and the exchange rate at the time the interest is paid.

Borrowing costs that are not directly related to the acquisition, construction, or production of a qualifying asset are recognized as an expense in the period in which they are incurred. These costs are generally shown as finance costs in the statement of profit or loss.

The future economic benefits of an asset are considered probable if it is likely that the asset will generate revenue or reduce expenses for the company.

A qualifying asset is an asset that meets specific criteria, typically related to its intended use and its construction process.

Interest on a lease for a qualifying asset is capitalised as borrowing costs. This means the interest expense is added to the cost of the asset instead of being expensed immediately.

Borrowing costs are the costs incurred by an entity when obtaining financing, including interest expense.

Exchange differences arise when a company borrows funds in a foreign currency and the exchange rate fluctuates. These differences can be considered as part of the borrowing costs if they are an adjustment to interest costs.

An entity may borrow in a currency that differs from its functional currency to minimize borrowing costs. The borrowing costs are compared to the cost of an equivalent loan in the company's functional currency.

Borrowing costs are only capitalised until the construction of a qualifying asset is complete.

Interest rate differential refers to the difference between the interest rate on a foreign currency borrowing and the interest rate of an equivalent loan taken in the company's functional currency.

The gains and losses that are an adjustment to interest costs include the interest rate differential, which reflects the difference in interest costs between borrowing in the functional currency and borrowing in a foreign currency.

Borrowing costs incurred specifically to obtain a qualifying asset, such as a building or machinery. These costs can be directly linked to the asset.

Costs incurred to finance a qualifying asset, but not directly linked to a specific asset.

The standard does not allow capitalizing the cost of equity, which is the return required by investors for their investment in the company.

If you use your own cash to finance a project, you cannot capitalize the hypothetical interest you could have earned on the money. This is not considered a forgone benefit.

Costs incurred for borrowing money that are directly related to the acquisition, construction, or production of a qualifying asset.

A standard that addresses the accounting treatment of borrowing costs related to qualifying assets.

When borrowing costs are recognized as expenses in the period in which they are incurred. This applies to borrowing costs that are not related to qualifying assets.

A method used to calculate interest expense on a loan. It takes into account the loan's interest rate, principal amount, and repayment schedule.

The primary accounting standard for borrowing costs in India.

The treatment of borrowing costs in accordance with Ind AS 23 differs from the treatment under AS 16. Ind AS 23 excludes certain assets from its scope, such as biological assets, while AS 16 does not.

In accounting, the rate used to calculate the amount of borrowing costs to be capitalized. It is typically a weighted average of the borrowing costs of the company.

A financial statement that summarizes the financial position of a company at a specific point in time.

The costs incurred in acquiring, constructing, or developing an asset that is ready for its intended use.

The period of time during which an asset is being acquired, constructed, or developed.

A subsidiary is a company controlled by another company, called the parent company.

A financial statement showing the revenues, expenses, and net income or loss of a company over a specific period of time.

The amount of borrowing costs that are included in the cost of a qualifying asset. It's calculated as the weighted average borrowing rate multiplied by the eligible expenditures during a period

A measure of the proportion of total borrowing used for the specific qualifying asset. It represents the weight (influence) each loan has based on its amount relative to the total borrowing.

Expenditures incurred during the construction period of a qualifying asset. These are the direct costs used to build or improve the asset.