Interest expenses when to capitalised or charged to profit and loss account

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Daya

Daya (Querist)
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31 October 2024 interest expenses when to capitalised or charged to profit and loss account.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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01 November 2024 Interest expenses should be capitalized when they are directly attributable to the acquisition, construction, or production of a qualifying asset. A qualifying asset is one that takes a substantial period of time to get ready for its intended use or sale, such as buildings, infrastructure projects, and large equipment.
Interest expenses should be charged to the profit and loss account when they do not meet the criteria for capitalization. This includes interest expenses on loans and borrowings used for general purposes or for assets that do not take a substantial period of time to get ready for their intended use.