Interest Capitalisation

This query is : Resolved

Nikita Khandelwal (Querist)
Follow

19 February 2010 If i have purchased a land taking a loan of 20 lacs. then what are the possible treatments available to me for the interest. Can i capitalise the interest paid on loan after aquisition of land & before repayment of loan. Or i can claim it as a deduction in P&L.. Plz tell.. if 1st option is possible as its preferable..
Thank U

Pradeep Kumar

Pradeep Kumar (Expert)
Follow

25 February 2010 See, the question of capitalisation comes when something has the nature of adding value to the asset.
Like installation charges of machinery, they add value to the product.
Interest as such does not add value.

Matching principle of accounting requires that cost of borrowing(interest)for an asset should be matched against the revenue that the asset generates.

This is the fundamental base of AS 16 on Borrowing Costs. Further AS 16 states that when an asset takes substantial time for getting ready to use, the interest should be capitalised.

In your case Land is not getting developed as such ans is always held ready to use.

For that matter Interest should not be capitalised.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

DHANASHRI KARMARKAR

CA Aakarsh Jain

Michael & Co.

divakar podaturu

sachingurav

Subscribe Now

Interest Capitalisation

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA