Articles on Ind AS 23

Objective and Scope – Ind AS 23

Objective and Scope – Ind AS 23 Objective Ind AS 23 “Borrowing Costs” prescribes the accounting treatment of borrowing costs (which are interest and other costs that an entity incurs in connection with the borrowing of funds), the circumstance in which the borrowing cost will be capitalized and when it will be recognized as expense Scope An entity shall apply this Standard in accounting for borrowing costsAn entity is not required to apply the Standard to borrowing costs directly attributable to the acquisition, construction or production ofa qualifying asset measured at fair value, for example, a biological asset within the scope of Ind AS …
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Recognition – Ind AS 23

Recognition – Ind AS 23 An entity shall capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that assetSuch borrowing costs are capitalized as part of the cost of the asset when it is probable that they will result in future economic benefits to the entity and the costs can be measured reliablyAn entity shall recognize other borrowing costs as an expense in the period in which it incurs them Borrowing costs eligible for capitalization: The borrowing costs that are directly attributable to the acquisition, construction or production of …
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Commencement of capitalization – Ind AS 23

Commencement of capitalization – Ind AS 23   When to begin capitalization An entity shall start capitalizing borrowing costs as part of the cost of a qualifying asset on the commencement dateThe commencement date for capitalization is the date when the entity first meets all of the following conditionsit incurs expenditures for the assetit incurs borrowing costs; andit undertakes activities that are necessary to prepare the asset for its intended use or sale Example: Borrowing cost to be capitalized On April 1, 2019, Compassionate Inc. began construction of homes for those families that were hit by the Typhoon and were homeless. The construction is expected …
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Suspension of capitalization – Ind AS 23

Suspension of capitalization – Ind AS 23 An entity shall suspend capitalization of borrowing costs during extended periods in which it suspends active development of a qualifying assetAn entity may incur borrowing costs during an extended period in which it suspends the activities necessary to prepare an asset for its intended use or saleSuch costs are costs of holding partially completed assets and do not qualify for capitalizationHowever, an entity does not normally suspend capitalizing borrowing costs during a period when it carries out substantial technical and administrative workAn entity also does not suspend capitalizing borrowing costs when a temporary delay …
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