Interesting question regarding AS 16

CA munjal (articled clerk) (100 Points)

06 February 2010  

I have a question regarding suspension of borrowing cost. According to me capitalistion of borrowing cost should be be suspended when avoidable activities stands suspended for extended period of time. While in case of unavoidable activities we should continue capitalisation. 

However according to my friend suspension of capitalisation of borrowing should be made when active development is interrupted due to abnormal activities. While capitalisation should be continued while normal activities are being carried on.

We have an argument that whether we should continue capitalisation when activities are stopped due to earthquake. 

In my opinion we should be allowed to capitalise as this is unavoidable activity and interruption is not on account of our default. According to my friend we should not capitalise as this is an abnormal activity. 

Please give your opinion.