Borrowing costs

Learning objectives

• Identify the costs that are borrowing costs (interest and other costs incurred in connection with the borrowing of funds).L1, L2

Normative references

• IAS 23 §5Definitions: borrowing costs; qualifying asset = an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• Borrowing costs are limited to the interest paid to the lender: the other costs the entity incurs in order to borrow funds are not part of them.L1
• Varenne is financing a construction project. It notes four items for its year: (1) interest on a bank loan, calculated at the effective interest rate; (2) interest on the lease liability of a lease contract; (3) the salaries of the project team; (4) the architect's fees. Which items are borrowing costs?L2