Hi
Wanted to understand the accounting to be done for the interest paid on term loan during the pre construction phase.
a. should the interest be capitalized with the asset and depreciated or
b. should the interest be charged off once commercial production begins or
c. should the interest be amortized separately
would appreciate advise in line with the accepted guidelines
Thanks
Shashi
As per Accounting Standard 16 Issued by ICAI, Borrowing cost (i.e. Interest etc) incurred during preconstruction should be capitalized (treated as Cost of Asset) - Your option (a) is in line with the Accounting Standard.
For AS 16 - Borrowing Cost please visit the following link
Yes Mr.Bhaskar is right.
Indian Accounting Standard also allows the same.
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