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FRS 102: accounting for borrowing costs – tips and advice

In part five of our exclusive new UK GAAP series, Helen Lloyd FCA unravels FRS 102 rules on accounting for borrowing costs under Section 25, highlighting potential pitfalls with the new rules which mark a departure from the old UK GAAP approach

This article focuses on Section 25 Borrowing Costs under FRS 102 Financial Reporting Standard applicable in the UK and Ireland. It is important to note that there was no directly equivalent standard in previous UK GAAP, although guidance relating to capitalising interest costs relating to fixed assets appears in FRS 15 Tangible Fixed Assets and FRS 10 Intangible Assets. In IFRS, IAS 23 addresses borrowing costs.

Scope and definitions - borrowing costs

Borrowing costs are defined in section 25.1 as ‘interest and other costs that an entity incurs in connection with the borrowing of funds’. These include (but are not explicitly limited to):

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