Accounting standard 16

Hi,

Borrowing Cost is the interest and other cost which is incurred by an enterprise in relation to borrowing of funds.

The following points should be considered for the purpose of borrowing cost:-

A.    Interest on short term loans or long term debts should be included as a part of borrowing cost.

B.     If any enterprise has incurred ancillary cost (related) for the arrangement of funds than amortized part of such cost should also be included as a part of borrowing cost. For example:- Brokerage, commission, stamp duty charges and any other related cost.

C.    Discounts / Premiums which are incurred by an enterprise in relation to arrangement of fund, such amount should not be taken in total but amortised part of Discount & Premium should be included as a part of borrowing cost.

On the basis of above explanation, stamp duty, processing charges and any other charges for getting loan are also considerable for the purpose of borrowing cost.

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