Lets say A company is incurring expenditure on a construction of a building. For this purpose it has borrowed fund. And after one year the project has ceased for 2 months due to strike in normal period.
Whether borrowing cost would capitalized during that period or not ?
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Borrowing cost
Replies (4)
Yes. It will be capitalised. Since the building still remains a qualifying asset. and there is no condition as to normal conditions to prevail for capitalising borrowing cost
i think it will be suspension of the borrowing cost
AS 16 states that capitalisation of borrowing costs are to be suspended for extended period where in active development is interrupted. Labour strike is one such phenomena which falls under this category. Interest during the 2 months shall not be capitalised.
Strike in normal period not in extended period than what is the treatment
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