Find the best tutors and institutes for BBA Tuition

Find Best BBA Tuition

Please select a Category.

Please select a Locality.

No matching category found.

No matching Locality found.

Outside India?

Search for topics

Borrowing Cost AS - 16

Ravi Yadav
09/06/2017 0 0

1) What are the: BC (Borrowing Cost) & QA (Qualifiying Asset)?

i) Borrowing Cost:

  • BC are interest & other coasts incurred by co in connection with borrowing funds

  • It includes int, commitment charges, amortised discount & premium & ancillary cost on BF, finance charges under lease & HP, Ex- change rate differences in foreign currency borrowings.

ii) Qualifying Assets:

  • It is an asset that necessarily takes a substantial period of time to get ready for its intended use (FA or Investment propery)  or sale (inventory)

  • Substantial period means 12 months and longer or shorter period may also consider if it is justified based on circumstances of each case

2) Recogintion & Types of BC:


  • BC that are Directly attributable to (a) Acquisition (b) Construction (c) Production of QA should be capitalised as the part of the cost of that asset

  • BC are capitalised when it is probable that QA will result in future economic benefits. The cost can be measured reliably.

  • Other BC Should be recognised as period expenses in P & L a/c


Types of BC:

  • Specific Borrowing: It is Specifically borrowed for a particular QA. BC on QA can be readily identified. Amount to be capitalised after deducting any income on temporary invetsments

  • General Borrowing: Here no.of debt instruments are used to borrowed @ varying rates of interest. BC on QA can not readily identifed. Step 1 is calculate w.avg at borrowing rate. Step 2 is calculate the amount to be capitalise. Step 3 is amount of BC capitalised during the period should not be more that actual BC.

3) Objective & Scope:

  • It  prescribes accounting teatment for BC.

  •  It does not deal with actual or imputed cost of ESC & PSC and it is not classified as liability.

4) Disclosures:

  •  Accouting policy adopted for BS                

  • Total amount of BC capitalised during the period

5) Capitalisation:

  • Commencement: If all conditions are satisfy.

  1. Expenditure on QA is incurred: It includes cash & transfer of other assets (less) any progress payments received & any Gov. grant received in connection to QA.

  2. BC are Being Incurred.

  3. Activities for QA are in progress for its intended use or sale

  • Suspension of Capitalisation:

  1. For period which active development is interrupted.

  2. Exception: 1.when substantial technical & Admin work is being carried out 2. Temporary delay is necessary for readying QA for intended sale or use.

  • Cessation:

  1. On substantial completion of QA: i.e QA in normally ready for its intended use or sale but some admin work or only some minor modifiactions are in pending.

  2. QA completed in parts (e.g Building park): If completed part is capable of being used or sale  while construction continues for the other parts, then cap.of BC in relation to that part should cease

  3. QA completed in full (e.g. Industrial plant ): If completed part cannot be used untill construction of all parts is completed then Cap.of BC should be cease only when substantially all activities relating to the QA is completed for its intended use or sale.


0 Dislike
Follow 0

Please Enter a comment


Other Lessons for You

Margin of Safety?
What is the Margin of Safety? Suppose a class 11th student need 33 marks to pass a paper. If a student gets exactly 33 marks, then he will be a pass. These 33 marks are called Break-Even-Point Marks. ...

Ca Prashanth Reddy | 5 days ago

0 0

Stock Market Trend
Trade war. Rising interest rates. Anti-EU sentiment in Europe. A nuclear showdown with North Korea. After a series of worries — or even shocks — to start the year, what jolts await in the stock...

Aruna S. | 12 Jul

0 0

Is accountancy science and art? Explain ?
Is accountancy science and art?:--Accountancy plays a very important role in these days of growing commercial and trade. Frequently various laws and Acts like—Company’s Act, M.R.T.P. Act are...

What is Co- Branding?
Co branding is the utilization of two or more brands to name a new product. The ingredient brands help each other to achieve their aims. The overall synchronization between the brand pair and the new product...

A short concept of Fiscal Deficit in Economics :--
A fiscal deficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits. A...

Find Best BBA Tuition ?

Find Now » is India's largest network of most trusted tutors and institutes. Over 25 lakh students rely on, to fulfill their learning requirements across 1,000+ categories. Using, parents, and students can compare multiple Tutors and Institutes and choose the one that best suits their requirements. More than 6.5 lakh verified Tutors and Institutes are helping millions of students every day and growing their tutoring business on Whether you are looking for a tutor to learn mathematics, a German language trainer to brush up your German language skills or an institute to upgrade your IT skills, we have got the best selection of Tutors and Training Institutes for you. Read more