According to as 16, if an asset is ready for its intended use t the time of its aquisition, it is ineligible for capitalization. Say a truck requires a waiting period of 1.5 years. So should we disallow capitalization of interest on the ground that it would be ready for its intended use t the time of its aquisition?
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AS 16
Replies (1)
I believe that if the amount has been borrowed specifically for purchase of the truck and the asset is not ready for its intended use on day one. It is in the process of making and becomes ready for use of the purchaser only after a period of 1.5 years. So I think there is no bar on capitalisation of borrowing cost provided that the asset is an qualifying asset (pl also refer para 10,11 of AS 16)
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