Philippine Public Sector Accounting Standard 5

BORROWING COSTS

Table of Contents
PAG
Number
BACKGROUND
INTRODUCTION TO THE IPSAS 5
PHILIPPINE APPLICATION GUIDANCE TO IPSAS 5
Scope

Borrowing Costs-Allowed Alternative Treatment

Effective Date

PPSAS 5- Borrowing Costs

January 2014

Page 1

Philippine Public Sector Accounting Standard 5

BORROWING COSTS
Background
This Philippine Public Sector Accounting Standard (PPSAS) 5 consists of
International Public Sector Accounting Standard (IPSAS) 5, Borrowing
Costs, and the Philippine Application Guidance (PAG) prepared to suit the
Philippine public sector situation.
The IPSAS 5 was issued in May 2000 by the International Public Sector
Accounting Standards Board (IPSASB) of the International Federation of
Accountants (IFAC). This includes amendments resulting from IPSASs
issued up to January 15, 2012.
The PAG (in italics) provides supplementary guidance on the proper
implementation of IPSAS 5.
Introduction to the IPSAS 5
IPSAS 5 prescribes the accounting treatment for borrowing costs
consisting of interest and other expenses incurred by an entity in
connection with the borrowing of funds. This Standard sets the criteria
when the borrowing costs shall be treated as expense and when these
shall be capitalized as part of the cost of the assets.
Philippine Application Guidance to IPSAS 5
Scope
PAG1.Paragraph 2 deals with the applicability of this Standard to all public
sector entities other than Government Business Enterprises (GBEs).
GBE is an entity that has all the following characteristics: (a) Is an
entity with the power to contract in its own name; (b) Has been
assigned the financial and operational authority to carry on a
business; (c) Sells goods and services, in the normal course of its
business, to other entities at a profit or full cost recovery; (d) Is not
reliant on continuing government funding to be a going concern
(other than purchases of outputs at arms length); and (e) Is
controlled by a public sector entity.
This standard shall be applied to all National Government Agencies
(NGAs), Local Government Units (LGUs) and Government-Owned
and/or Controlled Corporations (GOCCs) not considered as GBEs.
Borrowing Costs-Allowed Alternative Treatment

PPSAS 5- Borrowing Costs

January 2014

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PAG2.Paragraph 18 deals with the capitalization of borrowing costs that

are directly attributable to the acquisition, construction, or
production of a qualifying asset.
For borrowing costs pertaining to loans borrowed by the National
Government (NG) which are recorded by the Bureau of the Treasury,
the benchmark treatment shall be used. However for loans
borrowed directly by the LGUs and GOCCs not considered as GBEs,
the allowed alternative treatment shall be used.
Effective Date
PAG3.This PPSAS shall apply for annual financial statements covering
periods beginning January 1, 2014.

PPSAS 5- Borrowing Costs

January 2014

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