Arjun M K (Student) (181 Points)
19 April 2016
A Limited has deployed owned funds for constructing a qualifying asset for B Limited and has charged interest of say, Rs.1 Crore on B Limited. Interest computation is based on the funds deployed everyday for the construction multiplied by a interest rate . Whether B Limited can capitalise this cost as borrowing cost? Assume qualifying asset conditions are satisfied.
arun kumar sawlani
(C.A.)
(71 Points)
Replied 20 April 2016
Arjun M K
(Student)
(181 Points)
Replied 02 May 2016
Hi Arun. For clarity, qualifying asset is not a fixed asset. It is an inventory. It is a project work in progress in the books of a Real estate company.
arun kumar sawlani
(C.A.)
(71 Points)
Replied 02 May 2016
arun kumar sawlani
(C.A.)
(71 Points)
Replied 02 May 2016
Arjun M K
(Student)
(181 Points)
Replied 04 May 2016
A Ltd has only depoloyed some funds in the initial stage of the real estate project, which now is undertaken by B Ltd. For which, A Ltd has charged some interest on the funds used by them for B Lts's project. This is more of a nature of notional interest. First of all, there is no borrowing in B Lts's books. Second of all, AS 16 Borrowing costs definition includes only borrowings from banks and financial institutions, not from companies / related parties.
arun kumar sawlani
(C.A.)
(71 Points)
Replied 04 May 2016
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