“Borrowing Cost attributable to Qualifying Assets must be capitalized.”
“Qualifying Assets are assets that take a
substantial period of time to become ready for their intended use or for sale.”
Say a Company borrow funds and pay share
application money. However, shares are not allotted for a substantial period of
time, is it possible to capitalize the borrowing costs to this account?
The intended is that of investments i.e.
allotted shares. Therefore, technically under the definition of A.S. 16
capitalization should be allowed. However under IFRS, there is specific
exclusion since until shares are allotted in legal form it is only an advance
i.e. ready for call back. In A.S. 16, there is no such specific exclusion.
However the ICAI has issued a Expert Opinion on this issue in line with
International Practice treating this is not eligible for capitalization. The
soon to come Ind.
A.S. also has such specific exclusion, however, currently the issue is
debatable.
Hey.....are u taking classes from prasad sir........???
ReplyDeleteI wrote this from 1 of the author's book which I referred for my CA Final.
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