BC14A When determining the funds that an entity borrows generally, paragraph 14 of IAS 23 required an entity to exclude borrowings made specifically for the purpose of obtaining a qualifying asset. The Board was asked whether an entity includes borrowings made specifically to obtain a qualifying asset in general borrowings when that qualifying asset is ready for its intended use or sale.

BC14B The Board concluded that the reference to 'borrowings made specifically for the purpose of obtaining a qualifying asset' in paragraph 14 should not apply to a borrowing originally made specifically to obtain a qualifying asset if that qualifying asset is now ready for its intended use or sale.

BC14C The Board observed that paragraph 8 requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Paragraph 10 states that borrowing costs are directly attributable to a qualifying asset if those borrowing costs would have been avoided had the expenditure on the qualifying asset not been made. In other words, an entity could have repaid that borrowing if the expenditure on the qualifying asset had not been made. Accordingly, paragraph 14 requires an entity to use all outstanding borrowings in determining the capitalisation rate, except those made specifically to obtain a qualifying asset not yet ready for its intended use or sale.