IAS 23 Borrowing Costs Calculator: Capitalisation Rate

Use this IAS 23 calculator to estimate borrowing costs eligible for capitalisation from specific borrowings and general borrowings. It calculates a weighted-average capitalisation rate, time-weighted qualifying expenditures and the IAS 23 period cost cap.

Before calculating: confirm that the asset is a qualifying asset and that expenditures, borrowing costs and preparation activities have all commenced. Exclude extended inactive suspension periods.

1. Specific borrowing

Actual borrowing costs in qualifying period Temporary investment income

Eligible specific borrowing costs = actual borrowing costs less temporary investment income.

2. General borrowings

Average relevant general borrowings Borrowing costs on general borrowings for period

Qualifying-asset expenditures

Expenditure amountEligible months (0–12)

Months are a practical annual time-weighting input. Use only months within the valid capitalisation period.

Calculation results

Specific costs eligible—

General capitalisation rate—

Weighted qualifying expenditure—

General costs before period cap—

General costs eligible after period cap—

Total estimated borrowing costs eligible for capitalisation—

How the calculator works

Step	Formula
Specific borrowing	Actual borrowing costs − temporary investment income
General capitalisation rate	General borrowing costs ÷ average relevant general borrowings
Weighted expenditure	Expenditure × eligible months ÷ 12
General eligible cost	Weighted expenditure × capitalisation rate, capped at general borrowing costs incurred

Worked example result

With the default figures, eligible specific costs are $65,000. The general capitalisation rate is 8.75%, weighted expenditure is $337,500 and eligible general borrowing costs are $29,531.25. The combined estimated amount is $94,531.25, subject to the IAS 23 recognition requirements and the facts of the financing arrangement.

Important limitations

• Do not enter costs from extended periods when active development was suspended.
• Exclude specific qualifying-asset borrowings from the general pool while IAS 23 requires their exclusion.
• The calculator does not decide whether an asset is a qualifying asset.
• Foreign-exchange differences, group financing and complex refinancing require entity-specific judgement.
• The final amount capitalised cannot exceed relevant borrowing costs incurred.

For definitions, commencement, suspension, cessation, journal entries and disclosures, read the IAS 23 Borrowing Costs practical guide.

Why are expenditures time weighted?

Capitalisation applies while funds are used for the qualifying asset during the valid capitalisation period. Time weighting approximates the portion of annual expenditure exposed to the capitalisation rate.

Why is the result capped?

IAS 23 does not permit an entity to capitalise more borrowing costs during a period than it incurred during that period.

Does the result automatically qualify for capitalisation?

No. It is an estimate. The asset, expenditure, financing and development period must satisfy IAS 23, and professional judgement may be required.

Educational note: This tool provides an estimate for learning and preliminary analysis. It does not replace the complete IFRS Accounting Standards or advice from a qualified accountant or auditor. Reference: IFRS Foundation IAS 23.