Borrowing Costs Compared

IAS 23 and IPSAS 5 address borrowing costs using similar definitions and capitalisation mechanics, but they do not prescribe the same accounting policy. The reporting framework and, under IPSAS 5, the entity’s policy must be identified before the requirements are applied.

Principal difference

IAS 23 requires capitalisation of borrowing costs directly attributable to a qualifying asset. IPSAS 5 uses immediate expensing as its benchmark treatment but permits capitalisation as an allowed alternative that must be applied consistently to all qualifying assets.

IAS 23: Mandatory capitalisation of directly attributable borrowing costs
IPSAS 5 benchmark: Borrowing costs recognised as an expense when incurred
IPSAS 5 alternative: Capitalisation permitted and applied consistently
Shared mechanics: Qualifying assets, direct attribution, measurement and capitalisation period
Public-sector distinction: Service potential, centralised financing and economic-entity considerations
Application sequence: Framework → policy → asset → costs → period → disclosures

IAS 23 and IPSAS 5 side by side

The table separates the accounting-policy difference from the measurement and timing requirements that become broadly comparable when an IPSAS 5 entity applies the allowed alternative.

Requirement	IAS 23	IPSAS 5
Core or benchmark treatment	Capitalise borrowing costs directly attributable to a qualifying asset; recognise other borrowing costs as an expense.	Recognise borrowing costs as an expense in the period in which they are incurred.
Alternative treatment	No general policy option to expense borrowing costs that IAS 23 requires to be capitalised.	Permits directly attributable borrowing costs to be capitalised as part of the cost of a qualifying asset.
Consistency	Apply IAS 23 to borrowing costs within its scope.	If the allowed alternative is adopted, apply it consistently to all borrowing costs directly attributable to all qualifying assets.
Qualifying asset	An asset that necessarily takes a substantial period to become ready for intended use or sale.	Uses the same core definition and includes public-sector examples such as hospitals, roads and bridges.
Specific borrowings	Actual borrowing costs incurred less temporary investment income.	Comparable calculation when the allowed alternative is applied.
General borrowings	Weighted-average capitalisation rate applied to expenditures on the qualifying asset, subject to the period borrowing-cost ceiling.	Comparable calculation when the allowed alternative is applied, with additional public-sector guidance on centralised financing.
Commencement	Expenditures and borrowing costs are incurred and necessary preparation activities are in progress.	Outlays and borrowing costs are incurred and necessary preparation activities are in progress.
Suspension	Suspend during extended periods in which active development is interrupted.	Comparable requirement under the allowed alternative.
Cessation	Cease when substantially all activities necessary to prepare the asset are complete; apply by separately usable part where appropriate.	Comparable requirement under the allowed alternative.
Disclosure	Disclose the amount capitalised and capitalisation rate.	Disclose the accounting policy; when capitalising, also disclose the amount capitalised and capitalisation rate.
Reporting boundary	Does not contain IPSAS-specific guidance on centralised public-sector financing.	Distinguishes costs incurred by an entity from costs considered at economic-entity level.

Technical application sequence

1Identify the reporting frameworkDetermine whether IAS 23 or IPSAS 5 governs the transaction.

2Identify the IPSAS 5 policyFor IPSAS reporting, determine whether the benchmark or allowed alternative applies.

3Apply the qualifying-asset definitionDetermine whether the asset necessarily takes a substantial period to become ready.

4Measure directly attributable costsApply the specific- or general-borrowing requirements.

5Apply commencement, suspension and cessationCapitalise only during the eligible capitalisation period.

6Apply presentation and disclosure requirementsRecord the asset cost or expense and provide the required disclosures.

Worked comparison examples

Example 1: same financing facts, different policy outcome

An entity has general borrowings of GH¢8,000,000 at 9% and GH¢4,000,000 at 13%, outstanding throughout the year. Its weighted qualifying expenditures are GH¢6,000,000, all capitalisation conditions are satisfied, and total borrowing costs for the year are GH¢1,240,000.

The weighted-average capitalisation rate is 10.33%, calculated using the unrounded result of GH¢1,240,000 ÷ GH¢12,000,000. The amount directly attributable to the qualifying asset is therefore GH¢620,000.

Framework and policy	Asset cost	Expense	Disclosure consequence
IAS 23	Capitalise GH¢620,000	Recognise the remaining GH¢620,000	Disclose GH¢620,000 capitalised and the 10.33% rate
IPSAS 5 benchmark	No borrowing cost capitalised	Recognise the full GH¢1,240,000	Disclose the benchmark accounting policy
IPSAS 5 allowed alternative	Capitalise GH¢620,000	Recognise the remaining GH¢620,000	Disclose the policy, GH¢620,000 capitalised and the 10.33% rate

Comparison point: the measurement mechanics align when IPSAS 5’s allowed alternative is applied, but the benchmark treatment produces a different asset cost and expense.

Example 2: specific borrowing and temporary investment income

An entity incurs GH¢900,000 of specific borrowing costs and earns GH¢60,000 by temporarily investing unused proceeds. Under IAS 23, GH¢840,000 is eligible for capitalisation if all other conditions are met. An IPSAS 5 entity reaches the same measurement only if it applies the allowed alternative; under the benchmark treatment, borrowing costs are expensed when incurred.

Example 3: commencement, suspension and necessary delay

Borrowing costs of GH¢1,200,000 are incurred evenly at GH¢100,000 per month. Expenditures and borrowing costs begin on 1 January, but the site is held without development activity in January and February. Engineering and permitting work is performed from March, physical construction runs from May to August, and a contractual dispute stops all qualifying activity during September and October. Work resumes in November and includes a necessary curing period before completion on 31 December.

Period	Capitalisation assessment under IAS 23 or the IPSAS 5 allowed alternative	Amount
January–February	No necessary preparation activity; capitalisation has not commenced	Expense GH¢200,000
March–August	Engineering, permitting and physical construction are qualifying activities	Capitalise GH¢600,000
September–October	Extended interruption in active development	Expense GH¢200,000
November–December	Development resumes; the necessary curing period does not cause suspension	Capitalise GH¢200,000

IAS 23 and the IPSAS 5 allowed alternative therefore produce GH¢800,000 of capitalised borrowing costs and GH¢400,000 of expense. Under the IPSAS 5 benchmark treatment, the full GH¢1,200,000 is recognised as an expense.

Example 4: centralised public-sector financing and reporting boundary

A ministry borrows GH¢20,000,000 externally at 10% specifically to finance a hospital constructed by a controlled authority. The ministry transfers the funds interest-free. The hospital is a qualifying asset, all capitalisation conditions are satisfied throughout the year, and no temporary investment income is earned.

Reporting perspective	Analysis	Outcome
Authority’s separate IPSAS financial statements	The authority incurred no borrowing cost; the transfer does not create one.	No borrowing cost is available for capitalisation.
IPSAS economic entity — benchmark	The consolidated entity recognises the external borrowing and hospital asset.	Expense GH¢2,000,000.
IPSAS economic entity — allowed alternative	The GH¢2,000,000 external borrowing cost is directly attributable and the capitalisation conditions are satisfied.	Capitalise GH¢2,000,000 through the appropriate consolidation adjustment.
IAS 23 reporting entity	IAS 23 does not contain the same public-sector centralised-financing illustrations. The relevant reporting entity identifies its qualifying asset and directly attributable borrowing costs from its own facts.	Capitalise the amount required by IAS 23 when its recognition conditions are satisfied.

Comparison point: IPSAS analysis must not stop at the project. It must identify the policy and whether the borrowing cost exists in the separate entity or only at economic-entity level.

Key application differences

Do not describe IAS 23 and IPSAS 5 as prescribing identical accounting treatments.
Do not describe capitalisation under IPSAS 5 as compulsory.
Do not describe expensing under IAS 23 as an unrestricted accounting-policy choice.
Under IPSAS 5, identify whether costs arise in the separate entity or only at economic-entity level.
When IPSAS 5’s allowed alternative is used, apply it consistently to all qualifying assets.
Complete the analysis with the applicable disclosures, not only the capitalisation calculation.

Official sources and review basis

This comparison was checked against current primary IFRS Foundation and IPSASB sources. Source status was last reviewed 17 August 2026.

IFRS Foundation — IAS 23 Borrowing CostsOfficial issued-standard overview and history
IFRS Foundation — IAS 23 supporting materialOfficial implementation-support index
IPSASB — 2025 HandbookOfficial current handbook
IPSASB — IPSAS 5 Borrowing CostsOfficial standard in the 2025 handbook