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IFRS Guide > IAS 23

The International Accounting Standards Committee (IASC) released International Accounting Standard 23 (IAS 23) to address the topic of borrowing costs. Few large companies exist without debt, and accounting for the costs of borrowing this money is of concern to investors as is an obligation they must meet with regularity.

First off, borrowing costs are in essence interest (and associated) payments which the company must make. These costs are generally expensed as they are incurred by the entity as the loan agreement states, unless they are capitalizable. When items meet the criteria to become capitalized interest, it is generally capitalized to an asset that is being constructed and therefore is depreciated at the rate the rest of the asset is.

IAS are principles based standards, rather than strict rules based standards that govern international accounting. IAS standards differ from IFRS standards in that they were introduced prior to 2001, whereas IFRS were produced after this date by the IASB, or the International Accounting Standards Board. When determining the hierarchy of these, the IAS is considered to be the building blocks in which the newer and more relevant IFRS are founded and therefore IFRS is more authoritative when these conflict.

Check out more high level explanations of the IASB IFRS in our Guide to IFRS International Financial Reporting Standards!