a company capitalize interest cost of holding investments and adds to cost of investment every year , thereby understating profit and loss account. comment on the accounting treatment done by the company in context of relevant as?
Hello Nirmita 1. Investments other than investment in properties are not qualifying assets as per AS-16 Borrowing Costs. 2. Therefore, interest cost of holding such investments can't be capitalized. Further, even interest in respect of investment in properties can only be capitalized if such properties meet the definition of qualifying assets. 3. Also, where the investment properties meet the definition of qualifying assets the other requirements of the standard such as that borrowing costs should be directly attributable to the acquisition or construction of the investment property.
Therefore, accounting treatment done by the company is wrong according.
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