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ACCOUNTING STANDARDS

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(Querist)
17 March 2010 DEAR ALL,
I HAVE A QUERY RELATED TO AS 16(BORROWING COST). I WANT TO KNOW ABOUT THE EXTENDED PERIOD OF QUALIFYING ASSET IN RELATION TO WHICH THE BORROWING COST IS CAPITALIZED. WHEN WE NEED TO LOOK AT THE REASONS FOR DELAY IN DEVELOPMENTAL ACTIVITIES.AND IN which case we have to suspend the capitalization?
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Madhusudan Bohra

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Madhusudan Bohra (Expert)
19 March 2010 As per IAS 23, if there is an extended period during which there is no activity to prepare the assets for its intended use, capitalisation of borrowing cost should be suspended.

If the delay is normal and is expected given the nature of the project, borrowing cost will continue to be capitalised.

Further, unless the break in activity is significant, it is usually ignored.

However, if the dalay is long, not normal and not expected given the nature of the project, borrowing cost during this extended period should not be capitalised.

Hope this clarifies.
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