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 asset
An 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 sale
Such costs are costs of holding partially completed assets and do not qualify for capitalization
However, an entity does not normally suspend capitalizing borrowing costs during a period when it carries out substantial technical and administrative work
An entity also does not suspend capitalizing borrowing costs when a temporary delay is a necessary part of the process of getting an asset ready for its intended use or sale
For example, capitalization continues during the extended period that high water levels delay construction of a bridge, if such high-water levels are common during the construction period in the geographical region involved

Cessation of capitalization:

An entity shall cease capitalizing borrowing costs when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete
An asset is normally ready for its intended use or sale when the physical construction of the asset is complete even though routine administrative work might still continue
If minor modifications, such as the decoration of a property to the purchaser’s or user’s specification, are all that are outstanding, this indicates that substantially all the activities are complete

When an entity completes the construction of a qualifying asset in parts and each part is capable of being used while construction continues on other parts, the entity shall cease capitalizing borrowing costs when it completes substantially all the activities necessary to prepare that part for its intended use or sale
A business park comprising several buildings, each of which can be used individually, is an example of a qualifying asset for which each part is capable of being usable while construction continues on other parts
An example of a qualifying asset that needs to be complete before any part can be used is an industrial plant involving several processes which are carried out in sequence at different parts of the plant within the same site, such as a steel mill

An entity shall disclose
- the amount of borrowing costs capitalized during the period; and
- the capitalization rate used to determine the amount of borrowing costs eligible for capitalization

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