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Corporate Financial Reporting · Borrowing Costs (Ind AS 23)

Ind AS 23 Disclosure Requirements and Differences from AS 16

Updated 11 October 2026 · Fact-checked

Ind AS 23 requires an entity to disclose two things: the amount of borrowing costs capitalised during the period, and the capitalisation rate used to work out the eligible amount. To answer comparison questions, set Ind AS 23 against AS 16 and IAS 23 point by point, especially exchange differences (para 6(e) and 6A).

Understand Disclosure Requirements and Ind AS 23 vs AS 16

Disclosure under Ind AS 23 is short. Paragraph 26 says an entity shall disclose (a) the amount of borrowing costs capitalised during the period and (b) the capitalisation rate used to determine the amount eligible for capitalisation. That is the full list in the standard. The capitalisation rate matters only where general borrowings are used, but you disclose the rate used whenever one is applied.

The rate itself comes from paragraph 14. It is the weighted average of the borrowing costs applicable to all borrowings outstanding during the period. Borrowings made specifically to obtain a qualifying asset are left out until substantially all activities to prepare the asset are complete. The amount capitalised can never exceed the borrowing costs actually incurred in the period.

Now the exchange difference rules. Paragraph 6(e) of Ind AS 23 treats exchange differences on foreign currency borrowings as borrowing costs to the extent they are regarded as an adjustment to interest. Paragraph 6A was added in Ind AS 23 to say how that adjustment is determined. The adjustment is the exchange loss to the extent it does not exceed the difference between the cost of borrowing in functional currency and the cost of borrowing in a foreign currency. If an unrealised exchange loss was treated as an adjustment to interest and a later gain arises on settlement or translation of the same borrowing, the gain, to the extent of the loss earlier recognised as an adjustment, is also treated as an adjustment to interest.

The Ind AS 23 vs IAS 23 carve-outs are in Appendix 1, which is not part of the standard. Paragraph 6A is added because IAS 23 gives no guidance on how the paragraph 6(e) adjustment is determined. Paragraphs 6(b) and 6(c) appear as Deleted in IAS 23, and their numbers are kept in Ind AS 23 for consistency. Transitional paragraphs 27-28 of IAS 23 are not in Ind AS 23, because transitional rules sit in Ind AS 101. Effective-date paragraphs 29-29B are not included, as they are not relevant in the Indian context, but the numbers are retained.

If a question asks for differences from older Indian GAAP, rely on your ICMAI study material. Do not invent differences in the exam. Stick to those you are sure of and link each to a rule.

Key rules to remember

Disclosure under Ind AS 23 (para 26)
Disclose (a) borrowing costs capitalised in the period; (b) capitalisation rate used
Both items are required. Mention the rate even when you only show the amount.
Capitalisation rate (para 14)
Capitalisation rate = Σ borrowing costs on general borrowings ÷ Σ weighted average general borrowings outstanding
Exclude specific borrowings for a qualifying asset until substantially all activities are complete.
Eligible cost on general borrowings
Expenditure on asset × capitalisation rate
Average carrying amount including borrowing costs already capitalised is normally a reasonable approximation of expenditure (para 18).
Ceiling on capitalisation
Amount capitalised ≤ borrowing costs incurred in the period
Para 14 states this ceiling for the borrowing costs an entity capitalises in a period. It is not limited to general borrowings.
Exchange difference adjustment (para 6A(i))
Adjustment = exchange loss, to the extent it does not exceed the difference between the cost of borrowing in functional currency and the cost of borrowing in a foreign currency
This is a limit on the exchange loss. Only the part of the exchange loss within this limit is treated as an adjustment to interest.

How to solve Disclosure Requirements and Ind AS 23 vs AS 16 questions

    Quickest way: Two-line disclosure plus paragraph-linked comparison

    When to use it: When the question asks you to list disclosures or state differences in a few marks.

    1. Write: amount capitalised during the period; capitalisation rate used (para 26).
    2. For differences, use a three-column mental grid: topic, Ind AS 23, older GAAP or IAS 23.
    3. Lead with exchange differences: para 6(e) and para 6A.
    4. Add Appendix 1 points for IAS 23: 6A added; 6(b), 6(c) deleted but numbers retained; 27-28 and 29-29B not included.
    5. Close with the computed figures if numbers are given.

    Common mistakes in Disclosure Requirements and Ind AS 23 vs AS 16

    • Listing extra disclosures such as interest expense by loan or qualifying asset names as mandatory under Ind AS 23.

      Students mix in disclosures from other standards or from practice.

      Fix: Limit the mandatory list to the two items in paragraph 26.

    • Forgetting to disclose the capitalisation rate.

      The numerical answer ends once the amount is computed.

      Fix: Always write the rate as a separate line in your answer.

    • Including specific borrowings in the weighted average rate for general borrowings.

      Students average all loans together.

      Fix: Exclude specific borrowings for the qualifying asset until substantially all activities are complete.

    • Capitalising more than the interest actually incurred.

      Rate × expenditure is applied mechanically.

      Fix: Compare with total borrowing costs incurred and cap at that amount.

    • Treating the whole exchange loss on a foreign loan as borrowing cost.

      Para 6(e) is remembered without para 6A.

      Fix: Limit the adjustment as per para 6A(i).

    • Saying Appendix 1 differences are part of the standard.

      Appendix 1 is printed with the standard.

      Fix: State that Appendix 1 is not part of the standard and only highlights differences from IAS 23.

    Worked examples

    Example 1

    During the year, Bharat Infra Ltd had general borrowings: ₹4,00,000 loan at 10% and ₹6,00,000 loan at 12%, both outstanding for the full year. It spent ₹5,00,000 on a qualifying asset, being the average carrying amount during the year. Compute borrowing costs to capitalise and state the Ind AS 23 disclosures.

    Show the solution
    1. Interest on first loan = ₹4,00,000 × 10% = ₹40,000.
    2. Interest on second loan = ₹6,00,000 × 12% = ₹72,000.
    3. Total interest = ₹1,12,000 on total borrowings of ₹10,00,000.
    4. Capitalisation rate = ₹1,12,000 ÷ ₹10,00,000 = 11.2%.
    5. Eligible cost = ₹5,00,000 × 11.2% = ₹56,000.
    6. Check the cap: ₹56,000 does not exceed ₹1,12,000 incurred, so it is allowed.

    Answer: Capitalise ₹56,000. Disclose: borrowing costs capitalised ₹56,000 and capitalisation rate 11.2%.

    Example 2

    Write short notes on how Ind AS 23 differs from IAS 23, as shown in its Appendix 1.

    Show the solution
    1. State that Appendix 1 is not part of the standard; it only brings out major differences from IAS 23.
    2. Exchange differences: IAS 23 gives no guidance on determining the para 6(e) adjustment. Ind AS 23 adds para 6A to provide it.
    3. Para 6A(i): the adjustment is limited to the extent the exchange loss does not exceed the difference between the cost of borrowing in functional currency and in foreign currency.
    4. Para 6A(ii): a later gain on the same borrowing is treated as an adjustment to interest up to the loss earlier recognised as an adjustment.
    5. Paragraphs 6(b) and 6(c) are Deleted in IAS 23; their numbers are retained in Ind AS 23 for consistency.
    6. Transitional paras 27-28 are not given, as transition is dealt with in Ind AS 101. Effective-date paras 29-29B are not included as not relevant in India, but numbers are retained.

    Answer: The main substantive difference is the addition of para 6A on exchange differences; the others are numbering and omission of transitional and effective-date paragraphs.

    Exam tips

    • Write the two paragraph 26 disclosures in every answer where figures are computed.
    • For comparison questions, use point-wise answers and cite para 6(e) and 6A.
    • In MCQs, watch for options that add disclosures not required by para 26.
    • Show the capitalisation rate working in full so you earn method marks even if a figure slips.
    • Do not claim differences from older Indian GAAP that you cannot tie to a rule; keep to points you are sure of.

    Practice questions from Borrowing Costs (Ind AS 23)

    Disclosure Requirements and Ind AS 23 vs AS 16 in other exams

    The same ground in other exams, if you are preparing for more than one or want another angle on it.

    Disclosure Requirements and Ind AS 23 vs AS 16: frequently asked questions

    What does Ind AS 23 require an entity to disclose?

    Two things: the amount of borrowing costs capitalised during the period and the capitalisation rate used to determine the amount eligible for capitalisation. This is in paragraph 26.

    What is the main difference between Ind AS 23 and IAS 23?

    Ind AS 23 adds paragraph 6A, because IAS 23 gives no guidance on determining the exchange difference adjustment in paragraph 6(e). Other differences concern retained paragraph numbers and omitted transitional and effective-date paragraphs.

    Why are paragraphs 6(b) and 6(c) still shown in Ind AS 23?

    They appear as Deleted in IAS 23. Ind AS 23 keeps their numbers so that paragraph numbering stays consistent with IAS 23.

    Is Appendix 1 of Ind AS 23 part of the standard?

    No. It is not part of the standard. It only highlights major differences between Ind AS 23 and IAS 23.