IAS 23 Borrowing Costs is a standard issued by the International Accounting Standards Board (IASB) that provides guidance on the accounting treatment of borrowing costs. Borrowing costs refer to the interest and other costs incurred in relation to borrowing funds. According to IAS 23, when such costs are directly attributable to the acquisition, construction, or production of a qualifying asset, they should be capitalized as part of the cost of that asset. A qualifying asset is one that takes a substantial period of time to get ready for its intended use or sale.

The consideration of what qualifies as 'substantial period' often depends on the circumstances, but typical examples include large facilities, such as buildings or manufacturing plants. For instance, if a company takes a loan to finance the construction of a large factory, the interest paid on this loan during the construction period would not be expensed. It would instead be capitalized and included in the factory's cost in the balance sheet.

This approach ensures that the financial cost associated with bringing such assets to usable condition represents part of their full cost in financial reports. However, costs not directly tied to such projects must still be recognized as expenses in the period they are incurred.

The application of IAS 23 can significantly affect a company's reported financial performance and position, as capitalizing or expensing borrowing costs influences both profit and asset values.