Document ID: chunk:federal_register_of_legislation:F2021C00862:body:0:p10
Version: federal_register_of_legislation:F2021C00862
Segment Type: other
Provision Reference: 
Character Range: 24555–27574

attributable to the acquisition, construction or production of a qualifying asset against its Process. The Board noted that the International Valuation Standards Council issued Technical Information Paper 2 The Cost Approach for Tangible Assets in April 2012, which includes discussion of inputs included in a model based on the cost approach, and that the IPSASB's Borrowing Cost project was on hold pending completion of the IPSASB's Conceptual Framework project.
     BC6 The Board noted that it would not be appropriate for the accounting for borrowing costs of not-for-profit public sector entities to differ from that of for-profit entities merely because the Board may favour a different treatment conceptually. The Board confirmed that departure from the requirements of IAS 23 Borrowing Costs should only be permitted where not-for-profit specific reasons for departure exist.
     BC7 The Board decided, on evaluation of IAS 23 against its Process, that the modification for not-for-profit public sector entities should be retained in AASB 123. The Board decided to add a Basis for Conclusions to AASB 123 to reflect its conclusions in this regard.

Significant issues

GAAP/GFS convergence
     BC8 The Board weighed its policy on GAAP/GFS harmonisation against its policy of transaction neutrality, noting that requiring not-for-profit public sector entities to capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset would create a further difference between Generally Accepted Accounting Principles (GAAP) and Government Finance Statistics (GFS). The Board considered the costs of tracking reconciling differences over the useful life of the assets, and noted that public sector infrastructure assets may have a longer useful life than most assets held by private sector entities.

Borrowing by not-for-profit public sector entities
     BC9 The Board discussed the nature of borrowing in the public sector. The Board observed that borrowing can be related to funding government activities or, in the case of the Commonwealth and depending on the economic circumstances, might have a public policy purpose such as supporting a domestic bond market.
     BC10 The Board noted that Australian governments generally use centralised borrowing agencies and the distribution of borrowings to government departments or other agencies could take a different form to the initial debt raising, and that there may be little nexus between centralised borrowings and the individual qualifying assets in a government entity. Similarities in the use of centralised borrowing activities between the Australian government and large private sector entities were considered. The Board also noted that the level of complexity in terms of the number of lines of credit and the number of group entities responsible for acquiring or constructing qualifying assets is likely to be greater than that of the for-profit sector.