Financial Reporting · Ind AS 23 Borrowing Costs

Ind AS 23 Disclosures and Differences from IAS 23

Updated 5 October 2026 · Fact-checked

Ind AS 23 requires you to disclose the borrowing costs capitalised in the period and the capitalisation rate where general borrowings fund qualifying assets. Its differences from IAS 23 are mostly references: Ind AS 109 and Ind AS 116 replace IFRS 9 and IFRS 16. Both standards require capitalisation, with no option to expense.

Understand Ind AS 23 Disclosures and Differences from IAS 23

Ind AS 23 tells you how to treat borrowing costs. Costs directly attributable to acquiring, constructing or producing a qualifying asset are capitalised. Other borrowing costs are expensed. The disclosure part is short. It only asks you to report what you did and how you did it.

The standard asks for two disclosures. First, the amount of borrowing costs capitalised during the period. Second, the capitalisation rate used to determine the amount eligible for capitalisation. The rate matters only when you borrowed generally and used the funds to obtain a qualifying asset. The disclosure of the accounting policy for borrowing costs arises from Ind AS 1.

Now the differences from IAS 23. Ind AS 23 is substantially aligned with IAS 23, so the genuine differences are small:

No option to expense. Both standards require borrowing costs on qualifying assets to be capitalised. Neither allows you to expense them. Do not write this as a difference.
Standard references. Ind AS 23 refers to the effective interest method under Ind AS 109 and to finance charges on leases under Ind AS 116. IAS 23 refers to IFRS 9 and IFRS 16 for the same items.
Numbering and wording. Cross-references use Ind AS numbering, and some wording differs. The substance is the same.

Exchange differences are not a substantive difference. In both standards, borrowing costs include exchange differences on foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Do not present this as the main difference.

Some features are common to both standards, so do not list them as differences:

Borrowing costs include interest under the effective interest method, lease finance charges and the exchange difference adjustment to interest.
For general borrowings, you apply a weighted average capitalisation rate to the expenditure on the asset.
You exclude borrowings made specifically to obtain another qualifying asset from the general pool until that asset is substantially ready.

For exam purposes, learn the disclosure list first. Then learn the differences as short points. Write each with its logic: what IAS 23 refers to, what Ind AS 23 refers to, and that the numbers are unaffected.

Key rules to remember

Capitalisation rate for general borrowings: Capitalisation rate = Σ (borrowing costs of general borrowings for the period) ÷ Σ (weighted average of those general borrowings outstanding in the period); Use only general borrowings. Exclude borrowings made specifically for another qualifying asset until that asset is substantially ready for use or sale.
Borrowing cost eligible on general borrowings: Eligible cost = Weighted average expenditure on the qualifying asset (funded by general borrowings) × Capitalisation rate; The amount capitalised cannot exceed the borrowing costs actually incurred in the period.
Borrowing cost eligible on specific borrowings: Eligible cost = Actual borrowing cost incurred on the specific borrowing − Income earned on temporary investment of unused funds; Deduct investment income only for the specific borrowing.
Required disclosures: (a) Accounting policy on borrowing costs; (b) Amount of borrowing costs capitalised during the period; (c) Capitalisation rate used for general borrowings; Items (b) and (c) come from the standard. Item (a) comes from the general policy disclosure requirement.

How to solve Ind AS 23 Disclosures and Differences from IAS 23 questions

Use this order for any question on Ind AS 23 disclosures or differences from IAS 23.

1Read the case and list each borrowing: specific or general, rupee or foreign currency.
2Confirm the asset is a qualifying asset, meaning one that takes a substantial period to get ready for use or sale.
3Compute the eligible cost. For specific borrowings use actual cost less investment income. For general borrowings use weighted average expenditure times the capitalisation rate.
4Check the cap: capitalised cost cannot exceed total borrowing cost incurred for the period.
5If foreign currency borrowings exist, separate the exchange difference that is an adjustment to interest cost from the rest. Treat only that part as a borrowing cost.
6Write the disclosures: policy, amount capitalised, and the capitalisation rate where general borrowings were used.
7If the question asks for differences, state the Ind AS 23 reference (Ind AS 109, Ind AS 116), the IAS 23 reference (IFRS 9, IFRS 16), and note that the amount capitalised is not affected.

Quickest way: Disclosure and difference checklist

When to use it: Use this when a theory question asks you to list disclosures or differences, and you have about five minutes.

Write the two named disclosures first: amount capitalised and capitalisation rate.
Add the accounting policy as the third point.
Write one line on what counts as borrowing cost, including the foreign exchange adjustment to interest.
State one line on how general borrowings use a weighted average rate.
Close with the differences: Ind AS 109 and Ind AS 116 references instead of IFRS 9 and IFRS 16, and no option to expense in either standard.

Common mistakes in Ind AS 23 Disclosures and Differences from IAS 23

Disclosing the capitalisation rate even when only specific borrowings were used.
Students memorise the disclosure list without its condition.
Fix: State that the rate is disclosed when funds were borrowed generally and used to obtain a qualifying asset.
Treating the whole exchange loss on a foreign currency loan as a borrowing cost.
Students see 'exchange difference' and capitalise all of it.
Fix: Capitalise only the part regarded as an adjustment to interest cost. Treat the rest as an ordinary exchange difference under Ind AS 21.
Using a simple average of interest rates for the capitalisation rate.
It is quicker than weighting.
Fix: Divide total general borrowing cost by the weighted average general borrowings outstanding.
Capitalising more than the interest actually incurred.
Students multiply expenditure by the rate and stop.
Fix: Always compare the result with total borrowing cost incurred in the period and take the lower.
Not deducting investment income on specific borrowings.
Students treat it as separate other income.
Fix: Deduct income from temporary investment of unused specific borrowings from the cost eligible for capitalisation.
Writing common features, such as the weighted average rate or the exchange difference adjustment, as differences from IAS 23.
Students assume every point in the standard is a difference.
Fix: List only the genuine points: Ind AS 109 and Ind AS 116 references and Ind AS numbering. State that both standards require capitalisation.

Worked examples

Example 1

A company builds a plant, a qualifying asset, using general borrowings. During the year, the company has two general loans: ₹40,00,000 at 10% outstanding all year and ₹20,00,000 at 13% outstanding all year. The weighted average expenditure on the plant is ₹30,00,000. Compute the capitalisation rate, the cost capitalised, and state the disclosures.

Show the solution

Borrowing cost on loan 1 = ₹40,00,000 × 10% = ₹4,00,000.
Borrowing cost on loan 2 = ₹20,00,000 × 13% = ₹2,60,000.
Total general borrowing cost = ₹6,60,000. Weighted average general borrowings = ₹60,00,000.
Capitalisation rate = ₹6,60,000 ÷ ₹60,00,000 = 11%.
Cost capitalised = ₹30,00,000 × 11% = ₹3,30,000. This is below the total cost of ₹6,60,000, so no cap applies.
Disclose the accounting policy, the amount capitalised of ₹3,30,000 and the capitalisation rate of 11%.

Answer: Capitalisation rate is 11%. Borrowing cost capitalised is ₹3,30,000. Disclose policy, ₹3,30,000 and 11%.

Example 2

A company takes a specific loan of ₹50,00,000 at 12% for a full year to build a warehouse, a qualifying asset. Assume the loan is outstanding for the whole year and the warehouse is under construction for the whole year, so the full year's borrowing cost is eligible. It invests ₹10,00,000 of unused funds temporarily and earns ₹40,000. Separately, a student's note says 'the capitalisation rate must be disclosed even for specific loans'. Compute the capitalisable cost and say whether the note is correct.

Show the solution

Assumption: the loan is outstanding and the warehouse is under construction for the whole year, so the full year's borrowing cost is eligible for capitalisation.
Actual borrowing cost = ₹50,00,000 × 12% = ₹6,00,000.
Less income from temporary investment = ₹40,000.
Cost eligible for capitalisation = ₹6,00,000 − ₹40,000 = ₹5,60,000.
On the note: the capitalisation rate is disclosed only where funds are borrowed generally and used to obtain a qualifying asset. Here the loan is specific, so actual cost is used and no rate is disclosed.
The amount capitalised of ₹5,60,000 is still disclosed, along with the accounting policy.

Answer: Capitalisable cost is ₹5,60,000, on the assumption that the loan is outstanding and the warehouse is under construction for the whole year. The student's note is incorrect, because the capitalisation rate is disclosed only for general borrowings, not for specific loans.

Exam tips

Write the disclosure list as numbered points. Examiners give marks per point.
In computational questions, show the rate working and the comparison with actual cost. Marks are given for both.
When asked for differences from IAS 23, give each point as Ind AS position, IAS position and impact. Do not write a general essay, and do not list common features as differences.
Foreign currency borrowing cases test the split between interest adjustment and pure exchange difference. Show the split clearly.
In case-scenario MCQs, read whether borrowings are specific or general before choosing the formula.

Practice questions from Ind AS 23 Borrowing Costs

Ind AS 23 Disclosures and Differences from IAS 23: frequently asked questions

What are the disclosure requirements of Ind AS 23?

You disclose the amount of borrowing costs capitalised during the period. You also disclose the capitalisation rate used where general borrowings funded qualifying assets. You also disclose the accounting policy for borrowing costs.

When do I disclose the capitalisation rate?

You disclose it when you capitalise costs on funds borrowed generally and used to obtain a qualifying asset. For specific borrowings, actual cost is used, so no rate is needed.

How do exchange differences affect borrowing costs under Ind AS 23?

Exchange differences on foreign currency borrowings are included in borrowing costs only to the extent they are regarded as an adjustment to interest costs. The remainder is dealt with under Ind AS 21. IAS 23 takes the same approach, so this is not a difference between the two.

What are the differences between Ind AS 23 and IAS 23?

Both standards require capitalisation of borrowing costs on qualifying assets, with no option to expense. Ind AS 23 refers to Ind AS 109 for effective interest and Ind AS 116 for lease finance charges, where IAS 23 refers to IFRS 9 and IFRS 16. Other differences are in numbering and wording, not substance.