Document ID: chunk:federal_register_of_legislation:F2021C00862:body:0:p2
Version: federal_register_of_legislation:F2021C00862
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Accounting Interpretations, and AASB 1057 Application of Australian Accounting Standards.  In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

Comparison with IAS 23
AASB 123 Borrowing Costs as amended incorporates IAS 23 Borrowing Costs as issued and amended by the International Accounting Standards Board (IASB).  Australian‑specific paragraphs (which are not included in IAS 23) are identified with the prefix "Aus".  Paragraphs that apply only to not-for-profit entities begin by identifying their limited applicability.

Tier 1
For-profit entities complying with AASB 123 also comply with IAS 23.
Not-for-profit entities' compliance with IAS 23 will depend on whether any "Aus" paragraphs that specifically apply to not-for-profit entities provide additional guidance or contain applicable requirements that are inconsistent with IAS 23.

Tier 2
Entities preparing general purpose financial statements under Australian Accounting Standards – Simplified Disclosures (Tier 2) will not be in compliance with IFRS Standards.
AASB 1053 Application of Tiers of Australian Accounting Standards explains the two tiers of reporting requirements.

Accounting Standard AASB 123

The Australian Accounting Standards Board made Accounting Standard AASB 123 Borrowing Costs under section 334 of the Corporations Act 2001 on 7 August 2015.

This compiled version of AASB 123 applies to annual periods beginning on or after 1 July 2021.  It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 6 March 2020 (see Compilation Details).

Accounting Standard AASB 123

Borrowing Costs

Core principle
1 Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense.
Aus1.1 In respect of not-for-profit public sector entities, borrowing costs may be expensed in accordance with paragraph Aus8.1.

Scope
2 An entity shall apply this Standard in accounting for borrowing costs.
3 The Standard does not deal with the actual or imputed cost of equity, including preferred capital not classified as a liability.
4 An entity is not required to apply the Standard to borrowing costs directly attributable to the acquisition, construction or production of:
(a) a qualifying asset measured at fair value, for example a biological asset within the scope of AASB 141 Agriculture; or
(b) inventories that are manufactured, or otherwise produced, in large quantities on a repetitive basis.

Definitions
5 This Standard uses the following terms with the meanings specified:
Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
6 Borrowing