November 03, 2021
The International Public Sector Accounting Standards Board® (IPSASB®) has issued Amendments to IPSAS 5, Borrowing Costs – Non-Authoritative Guidance.
The new pronouncement adds implementation guidance and illustrative examples to IPSAS 5. The new material illustrates how the existing principles for when borrowing costs can be capitalized should be applied in various regularly encountered public sector contexts. No amendments are proposed to the authoritative material in IPSAS 5, and the existing option to expense or capitalize borrowing costs is retained.
“We undertook this project to illustrate how to apply existing principles in IPSAS 5 to scenarios that are unique to the public sector,” said IPSASB Chair Ian Carruthers. “This new guidance should support our constituents in applying the existing standard to the practical challenges they have identified in determining which borrowing costs can be capitalized and when.”
This illustrative guidance addresses public sector specific issues by focusing on transactions associated with capitalizing borrowing costs when funds are borrowed by a related entity or centralized lending program. The additional guidance facilitates the preparation of financial reporting information that is relevant, faithfully representative, and comparable for these important public sector transactions.