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Borrowing cost

Anubhaw Garg (Chartered Accountant in Practice) (101 Points)

08 October 2016

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 ?

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4 Replies

CA Raj Doshi (Practising CA) (8733 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.