Borrowing costs per IAS 23

All topics related to IFRS Standards.
Post Reply
MrJackX
Posts: 17
Joined: 25 Jan 2021, 14:02

Borrowing costs per IAS 23

Post by MrJackX »

In accordance with IAS 23 borrowing costs may include FOREX changes of borrowings denominated in the foreign currency (as well as PL results of the derivatives that hedge this currency exposure). My question is - is it appropriate to use this guidance for financial institutions? IAS 23 for the most part applies to non-financial institutions that determine expenses on qualified assets. Does the same logic really apply to other cases? E.g. we have a portfolio of loans (not qualified assets, but financial assets) which is finances through other borrowings. Is it correct to disclose finance costs and include everything which is connected to borrowings into finance costs: interest on other borrowings, currency exchange differences, PL result on derivatives. How is this justified in accordance with IFRS - IAS 23?
DJP
Trusted Expert
Posts: 345
Joined: 26 Jun 2020, 15:57

Re: Borrowing costs per IAS 23

Post by DJP »

Hello,

I am not sure if I fully understand your question. Are you trying to understand where to present borrowing costs and related costs in the income statement? If so, the relevant standard is IAS 1, not IAS 23.
MrJackX
Posts: 17
Joined: 25 Jan 2021, 14:02

Re: Borrowing costs per IAS 23

Post by MrJackX »

hello, yes, it's a question of presentation per IAS 1, but when someone aggregates borrowing costs, currency exchange loss and pl on derivatives under the same line "finance costs', what logic do they follow? Is it acceptable to aggregate these items under finance costs, given that borrowing costs are calculated in accordance with ifrs 9 (eir method), currency exchange is determined in accordance with ias 21, and PL on derivatives is determined per ifrs 9? All of these items are material. Is it acceptable to present them together, i.e. on PL statement under finance costs?
DJP
Trusted Expert
Posts: 345
Joined: 26 Jun 2020, 15:57

Re: Borrowing costs per IAS 23

Post by DJP »

IAS 1 is rather silent regarding the income statement geography. It is not unusual for corporates to show all those items you mentioned under finance costs. It becomes a matter of internal policy.

IAS 23 and IFRS 9 is not the place to look for this.

Hope this helps!
MrJackX
Posts: 17
Joined: 25 Jan 2021, 14:02

Re: Borrowing costs per IAS 23

Post by MrJackX »

thank you
MrJackX
Posts: 17
Joined: 25 Jan 2021, 14:02

Re: Borrowing costs per IAS 23

Post by MrJackX »

Marek, hello. Thank you, this looks more straightforward now!
Post Reply