Ind as 23 borrowing cost

1. Compiled By CA Mohit Goyal

2. Compiled By CA Mohit Goyal

3. • Interested expenses calculated using effective interest method describe in
Ind AS 109.
• Finance Charges under lease
• Exchange difference
Compiled By CA Mohit Goyal

4. EXAMPLE
 Borrowed fund= 100 USD
 Exchange Rate on the date of borrowing 1$=Rs50
 Rate in foreign currency=5%
 Rate in Indian currency=10%
 Exchange Rate on year end 1$= Rs55
 Average Exchange Rate 1$=Rs52.5
Solution
 Exchange Difference-RS 500
 Interest (India)=5000*10%=Rs500
 Interest (foreign)=100*5%*52.5=Rs262.5
 Borrowing Cost to be recognized=Rs262.5+500 but limited to 500
that is borrowing cost in India
 Exchange Difference (As per Ind AS-21)=Rs237.5
Compiled By CA Mohit Goyal

5. CAPITALIZATION OF BORROWING COST
 Borrowing Cost directly attributable to acquisition, construction or
production of Qualifying Asset.
 Now question arises what is Qualifying Asset.
 Qualifying Asset means which takes substantial time to get ready to use or sale.
Compiled By CA Mohit Goyal

6. Amount of capitalization
Specific Borrowing
Actual borrowing cost-
Income from Idle Fund
General Borrowing
Amount Expended*Rate
Of capitalization*Period
Amount to be capitalized
can not exceed the
borrowing cost incurred
General condition-borrowing cost could be avoided if the asset was not acquired.
Compiled By CA Mohit Goyal

7. Commencement Of
Capitalization
Expenditure on QA
incurred
Borrowing Cost
Incurred
Undertakes activity to
prepare asset ready for
its intended use or sale
Compiled By CA Mohit Goyal

8. Suspension of
Capitalization
Extended Period
Active
Development
interrupted
Cessation of
Capitalization
Borrowing cost is
ceased to be
incurred
Asset is ready for
its intended use
Compiled By CA Mohit Goyal

9. Disclosures
Borrowing
Cost
Capitalized
Rate of
Capitalization
Compiled By CA Mohit Goyal

10. Basis AS IND-AS
Asset valued At Fair value Apply Does Not Apply
Large Quantity Products Apply Does Not Apply
Substantial Period of time Defined Not Defined
Hyperinflationary Economy Silent Borrowing Cost to compensate the
inflation should be expensed as
prescribed in Ind-AS 29
Weighted average rate of
capitalization
Silent Weighted average of Parent and subsy
may be considered
Disclosures Borrowing Cost Recognition Policy Capitalization Rate
Effective Rate of interest Specifically considered some cost like
discount on borrowing cost and
amortization of borrowing cost
It does not consider them as borrowing
cost but required that borrowing cost
should be recognized at effective rate
Compiled By CA Mohit Goyal

11. Compiled By CA Mohit Goyal