Indian Accounting Standard 23: Borrowing Costs

The standard differentiates between specific borrowings and general borrowings.

Borrowing costs must be actual costs incurred during the period, minus any investment income earned on temporarily invested funds.

No, notional borrowing costs cannot be capitalised.

<p>An entity cannot assume that forgone interest on its own cash resources can be capitalised because it does not represent an actual borrowing cost.</p> Signup and view all the answers

<p>Any investment income earned on temporarily invested funds must be deducted from the borrowing costs incurred.</p> Signup and view all the answers

<p>USD 1,000</p> Signup and view all the answers

<p>` 48,000</p> Signup and view all the answers

<p>` 51,000</p> Signup and view all the answers

<p>` 99,000</p> Signup and view all the answers

<p>It must result in future economic benefits and costs need to be measured reliably.</p> Signup and view all the answers

<p>` 51,000</p> Signup and view all the answers

<p>They are recognized as an expense in the period incurred.</p> Signup and view all the answers

<p>The part of borrowing costs that compensates for inflation is recognized as an expense.</p> Signup and view all the answers

<p>The permit is specific to one building and is considered a qualifying asset as it is part of the construction cost.</p> Signup and view all the answers

<p>Interest is capitalized because it is specific to the asset and incurred for its construction.</p> Signup and view all the answers

<p>Borrowing costs can be capitalized until the construction of the qualifying asset is complete.</p> Signup and view all the answers

<p>Exchange differences can be considered borrowing costs based on the terms of the foreign currency borrowing.</p> Signup and view all the answers

<p>Loans in foreign currency can have different interest costs when compared to equivalent loans in the functional currency.</p> Signup and view all the answers

<p>A company may expect over time that the borrowing costs in foreign currency will be less than those of a local currency loan.</p> Signup and view all the answers

<p>Leased equipment does not qualify for capitalization if it is ready for intended use at the acquisition date.</p> Signup and view all the answers

<p>A qualifying asset is one that is under construction and is eligible for the capitalization of related borrowing costs.</p> Signup and view all the answers

<p>` 1,85,625</p> Signup and view all the answers

<p>The capitalisation rate was derived by taking the weighted average of the interest rates of the existing loans, resulting in 16.5%.</p> Signup and view all the answers

<p>The 14% debentures were issued on 1st July, 20X1 to fund the construction of an office building.</p> Signup and view all the answers

<p><code>5,00,000 on 1st April, 20X1 and</code> 25,00,000 on 1st January, 20X2.</p> Signup and view all the answers

<p>Qualifying assets, like the plant being constructed, allow companies to capitalize borrowing costs related to their construction.</p> Signup and view all the answers

<p>` 4,000,000</p> Signup and view all the answers

<p>The interest rate for the 18% Bank Loan was 18%.</p> Signup and view all the answers

<p>The capitalized interest duration for the January expenditure is 3 months.</p> Signup and view all the answers

<p>A qualifying asset is one that necessarily requires a substantial period of time to be ready for its intended use or sale.</p> Signup and view all the answers

<p>Ind AS 23 does not require the application of this standard to borrowing costs related to qualifying assets measured at fair value, while AS 16 applies to all borrowing costs without such exclusions.</p> Signup and view all the answers

<p>Ind AS 23 excludes borrowing costs related to inventories that are manufactured or produced in large quantities on a repetitive basis.</p> Signup and view all the answers

<p>Ind AS 23 requires the calculation of interest expense using the effective interest rate method as outlined in Ind AS 109.</p> Signup and view all the answers

<p>AS 16 applies to borrowing costs related to all inventories that require a substantial period to bring them to a saleable condition.</p> Signup and view all the answers

<p>Ind AS 23 excludes borrowing costs for biological assets measured at fair value, whereas AS 16 does not provide such exclusion.</p> Signup and view all the answers

<p>The treatment allows for the exclusion of certain borrowing costs, which can lead to enhanced clarity in financial statements for entities with such assets.</p> Signup and view all the answers

<p>An entity might prefer Ind AS 23 to avoid recognizing borrowing costs on large-scale repetitive inventories, thus reducing reported expenses.</p> Signup and view all the answers

<p>No, Marine Transport Limited cannot capitalize borrowing costs for 20X1 because no ship production had commenced by that date.</p> Signup and view all the answers

<p>Yes, it is permissible as one ship's production began in March 20X2.</p> Signup and view all the answers

<p>25% of the contract value.</p> Signup and view all the answers

<p>Ind AS 23 requires disclosure of the capitalization rate to ensure transparency in financial reporting.</p> Signup and view all the answers

<p>Borrowing costs for foreign currency loans are computed with reference to the functional currency difference.</p> Signup and view all the answers

<p>The treasury department arranges funds for working capital and expansion programs.</p> Signup and view all the answers

<p>Ind AS 23 mandates the capitalization of borrowing costs, while AS 16 lacks a specific disclosure requirement.</p> Signup and view all the answers

<p>The subsidiary will reflect its specific borrowing circumstances, which may differ from the parent's costs.</p> Signup and view all the answers