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AS - 16 Practical Difficulty

Aditya Gupta (Chartered Accountants) (37 Points)

28 August 2009

We have taken a loan for a qualifying asset...Its Right to capitalise interest on the asset..But if we donot pay the interest and get it converted to FITL ie a fresh loan , then whether the interest on such FITL will also be capitalised.. Please help me out..

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3 Replies

CA munjal (articled clerk) (100 Points)
Replied 28 August 2009

If other conditions as mentioned in AS 16 relating to capatilsation of borrowing cost are satisfied then interest on FITL must be capitlaised.

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Aditya Gupta (Chartered Accountants) (37 Points)
Replied 29 August 2009

Thanks Munjal...Is there any clarification or notification in this regard because we are doing it the other way...We are treating it Revenue Expense..

CA munjal (articled clerk) (100 Points)
Replied 03 September 2009

There is no notification or clarification in my knowledge. However looking at the substance of the transaction (1) it is a term loan (2) it is utilised for qualifying asset and (3) Interest will be paid on such non repayment of loan. So in my view there is no reason for you to charge it to revenue account.