Lets say A company is incurring expenditure on a construction of a building. For this purpose it has borrowed fund. And after one year the project has ceased for 2 months due to strike in normal period.
Whether borrowing cost would capitalized during that period or not ?
4 Replies
CA Raj Doshi
(Practising CA)
(8944 Points)
Replied 08 October 2016
Yes. It will be capitalised. Since the building still remains a qualifying asset. and there is no condition as to normal conditions to prevail for capitalising borrowing cost
Bhavik Pankaj Mervana
(49 Points)
Replied 09 October 2016
i think it will be suspension of the borrowing cost
CA. Anaadi Mishra
(Chartered Accountant)
(64 Points)
Replied 09 October 2016
AS 16 states that capitalisation of borrowing costs are to be suspended for extended period where in active development is interrupted. Labour strike is one such phenomena which falls under this category. Interest during the 2 months shall not be capitalised.
Anubhaw Garg
(Chartered Accountant in Practice)
(101 Points)
Replied 09 October 2016
Strike in normal period not in extended period than what is the treatment
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