As-16
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 October 2013
Suppose we have taken a loan of Rs. 100Cr for Capex Purpose @ 10% .
That loan could be used to the extent of Rs.75 Crs only. Rs. 25 Crs is being invested in Mutual Fund and we got a return of 15%. Then what is the Interest amount needs to be capitalised
a.) Int Cost Rs.100 Crs *10%= 10.00 Crs
Less:Income on Invt
Rs.25 Crs*15%= 3.75 Crs
Net Borrowing Cost to be = 6.25 Crs
Capitalised
b.) Int Cost on Rs. 75 Crs = 7.5 Crs.
Had it would be suppose income on investment exceeds Rs.10.00 Crs (Total Int on Borrowings) then whether this income (Net of Interest) on investment needs to be deducted from cost of Fixed Assets.
That loan could be used to the extent of Rs.75 Crs only. Rs. 25 Crs is being invested in Mutual Fund and we got a return of 15%. Then what is the Interest amount needs to be capitalised
a.) Int Cost Rs.100 Crs *10%= 10.00 Crs
Less:Income on Invt
Rs.25 Crs*15%= 3.75 Crs
Net Borrowing Cost to be = 6.25 Crs
Capitalised
b.) Int Cost on Rs. 75 Crs = 7.5 Crs.
Had it would be suppose income on investment exceeds Rs.10.00 Crs (Total Int on Borrowings) then whether this income (Net of Interest) on investment needs to be deducted from cost of Fixed Assets.
09 October 2013
The ans is option b.) int cost on Rs 75 CR=7.5Crs, investment is to be ignored for the purpose of AS16.
No need to deduct it from fixed assets.
No need to deduct it from fixed assets.
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 October 2013
May I know why income on Investment is not deducted from interest cost.
Why Interest income is not being deducted from Capex Cost.
Why Interest income is not being deducted from Capex Cost.
10 October 2013
For that u need to refer the accounting treatment for AS16 on borrowing cost.
Secondly investment in mutual funds are no way connected to the capital exp of the asset that is why u need to give separate accounting treatment for income on investments.
Secondly investment in mutual funds are no way connected to the capital exp of the asset that is why u need to give separate accounting treatment for income on investments.
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