Capitalisation of interest
This query is : Resolved
20 December 2010
Dear All,
There is a commercial building consisting of 10 floors of which first 4 floors have been constructed and ready to use/sale.
The client has taken a loan for the said assets.
My question is, whether interest on said loan should be capitalized in full or there should be a segregation as regard to the completed floors. whether completed floors should be regarded as Independent assets?
If it is so then the interest should not be capitalised in full and only for remaining 6 floors should be capitalised As per As-16 read all together with As-10.
There is a commercial building consisting of 10 floors of which first 4 floors have been constructed and ready to use/sale.
The client has taken a loan for the said assets.
My question is, whether interest on said loan should be capitalized in full or there should be a segregation as regard to the completed floors. whether completed floors should be regarded as Independent assets?
If it is so then the interest should not be capitalised in full and only for remaining 6 floors should be capitalised As per As-16 read all together with As-10.
21 December 2010
Sir there is big difference between use and sale. If construction is for sale, As 16 will not apply at all.
In case for self use and capitalization as per AS 16 you can capitalize the interest on copmlete part and incoplete part as CWIP
In case for self use and capitalization as per AS 16 you can capitalize the interest on copmlete part and incoplete part as CWIP
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22 December 2010
bhagat sir is right.
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