Finance charges under lease with ref. to AS - 16

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Abhishek (Querist)
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12 November 2009 Under A S - 16, borrowing cost includes the finance charges under Finance lease. Also, BC can be capitalised only if an asset is QA.

However, as per AS - 19, there is no such example or statement is provided.

Please let me know any example or case where finance charges of an leased asset under finance lease can be clubbed in the asset cost.

shakuntala chhangani

shakuntala chhangani (Expert)
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13 November 2009 Hi Abhishek, good question. Para 4 gives u the examples of borrowing costs. as per AS 16 borrowing cost can be capitalised till the time asset is ready for commercial use.Once the asset is ready for intended use, then the borrowing cost will be dr. to P/L A/c. In case of finance lease, normally, the ready to use assets are taken therefore there is no question of capitalisation of finance charges as it will then be considered as revenue exp. Thanks and regards,
CA Shakuntala Chhangani

Abhishek

Abhishek (Querist)
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13 November 2009 Thanks.

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