6. Net financing costs
2020 | 2019 | |
|---|---|---|
Finance income | ||
Interest income | 4 | 10 |
4 | 10 | |
Finance costs | ||
Interest expense1 | 110 | 127 |
Lease interest expense | 10 | 10 |
Unwinding of discounts on provisions and other liabilities | 35 | 35 |
Unwinding of discount on deferred consideration | 22 | 23 |
Other finance costs | 6 | 8 |
183 | 203 | |
Net financing costs | 179 | 193 |
- 1 Interest expense for the year ended 30 June 2020 is presented net of capitalised interest of $9 million (2019: $21 million).
The weighted average capitalisation rate on funds borrowed for finance costs capitalised is 4.50% (2019: 5.61%).
ACCOUNTING POLICY
Net financing costs
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, are added to the cost of those assets.
All other finance costs are recognised in profit or loss in the period in which they are incurred. Finance costs comprise interest expense on borrowings calculated using the effective interest method, amortisation of borrowing costs relating to long-term financing facilities, unwinding of the discount on provisions and deferred consideration, and gains and losses on certain hedging instruments that are recognised in profit or loss.