07 February 2010
For the principal amount, it will certainly be included in the investing activities. For the Interest amount, it will be included in the investing objectives if it is capitalized with the cost of the Fixed Asset otherwise it will be included in operating activities.
07 February 2010
Amount spend for purchasing fixed assets falls in cash from investing activities as by using fixed assets we are going to generate some revenue. So, PRINCIPAL amount is an outflow for puchasing fixed assets would come in cash from investing activities as per AS-3.
For interest amount, as per AS-16, borrowing costs, if the fixed assets met the condition of qualifying assets then in that case only, the borrowing costs can be capitalised.
Qualifying assets are assets those take more than one year to get ready to use.
So, if the interest on loan taken for purchasing fixed assets can be capitalised as per AS-16 then in that case itself it would fall in cash from investing activities otherwise it should come in cash from operating activities or financing activities
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