An asset whose preparation for its intended use, sale or disposal takes a “substantial” amount of time which primarily depends on the facts and circumstances surrounding a specific case/ event. Generally, a period of 12 months is considered “substantial”. However, adjustment (for longer or shorter period) is needed as justified in view of corresponding facts and circumstances. For example, borrowing costs are capitalized in an entity’s accounts with the qualifying assets if it has justifiable facts that future economic benefits are expected to flow from such a use.

Otherwise, borrowing costs are usually recognized as an expense in the respective period in which these costs arise.