Indas - treatment of processing fees where entire borrowing cost is capitalised with capital asset


Chartered Accountant

As per Paragraph B5.4.1 of Ind AS 109, Financial Instruments, the origination fees (such as processing fees) incurred in relation to the creation of a financial liabilitie, will be included, while calculating the effective interest rate of the loan at the date of transition to Ind AS and is recognised as an expense over the term of the loan

As per Indian GAAP, when we were dealing with a loan borrowed specifically for purchasing an Equipment, the borrowing cost (incl. Processing fees, etc) was entirely capitalised along with the value of the Fixed Asset. But when transitioning to Ind-AS, whether we need to bring out the capitalised processing fees and recognise it as an expense over the period of the loan/borrowing?

 
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