Interest on loan

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 January 2012 I have taken a loan from bank for purchase of a flat to be given to employees on minimum rent. The loan got repaid within the same financial year. Such property is to be shown as investment property, can interest be capoitalised as per AS-16 read with AS-13

CA Prashant Gupta

CA Prashant Gupta (Expert)
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14 January 2012 Such property cannot be shown as investment property and as13 is not applicable. The property should be shown as fixed assets, if such property is acquire to give employees into the rent. AS 10 is applicable and As per As-16 along with AS-10, the borrowing cost incurred till property ready to use can be capitalised not the cost after it.

Querist : Anonymous

Querist : Anonymous (Querist)

15 January 2012 AS-10 describes fixed assets as:-

6.l Fixed asset is an asset held with the intention of being used for
the purpose of producing or providing goods or services and is not held
for sale in the normal course of business.

IAS-16 describes PPE as:-

Property, plant and equipment are tangible items that:
(a) are held for use in the production or supply of goods or services, for
rental to others, or for administrative purposes; and
(b) are expected to be used during more than one period.

So one can say that in converged accounting Standard flat [as said in question] can be accounted as FA and not in old standards