IAS 23 — Foreign exchange differences associated with capitalisable borrowing costs

Date recorded:

In August 2007, the IFRIC received a request for it to issue guidance on the accounting for foreign exchange differences associated with capitalised borrowing costs. Such foreign exchange differences may result in gains or losses for an entity. The request asked for guidance on two questions. Firstly, to what extent should foreign exchange differences be regarded as an adjustment to interest costs? Secondly, when an entity hedges its exposure to foreign exchange movements, to what extent should costs associated with the hedging instrument be considered to be part of the borrowing costs that may be capitalised? At this meeting, the IFRIC will consider whether to add a project to its agenda to develop guidance on the accounting for such foreign exchange gains and losses.

The IFRIC emphasised that the major reason for not picking up this issue is the latest revision to IAS 23 Borrowing Costs, where the Board did not provide guidance on that topic. However, the IFRIC Coordinator proposed that two possible amendments should be brought to the Board's attention to clarify accounting for such gains and losses:

  • Only the interest component of the foreign exchange gains or losses should be taken into account
  • Gains and losses should be treated symmetrically

It was also noted that this could be done in the next Annual Improvements Process.

The IFRIC decided not to take the item on its agenda and that staff make editorial changes to the proposed rejection wording.

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