AS 16

ranjani (Audit exec) (24 Points)

04 June 2009  

I had decided to put up a factory. I had purchased a land for that and constructed a building.  In addition i was able to purchase 50% of my plant and machinery . These costs were my own funds.

Since i ran short of own funds, i borrowed money to finance the rest of plant and machinery. I am paying interest and other charges on such borrowing costs and capitalising it,

Note:

1)Activities are in the factory cannot be carried out unless the entire machinery is installed.

2) I cannot use the land, bldg and 50% p&m unless the other part of 50% P&M is installed.

Can my qualifying asset include the land and building and 50% of my plant and machinery purchased out of own funds? Or should the qualyfying asset (on which i can capitalise my borrowing cost) consist of only the 50% of the P&M that i purchased out of Borrowed funds.

Please clarify..