Ind AS 23 - Borrowing Costs

Ind AS 23 - Borrowing Costs Simplified

1. Ind AS 23 Borrowing Costs CMA Raman Khanna [email protected]

2. CORE PRINCIPLE Borrowing Costs which are directly ATTRIBUTABLE to ACQUISITION CONSTRUCTION PRODUCTION of a QUALIFYING ASSETS and form part of cost of the asset NOT directly ATTRIBUTABLE Recognized as an EXPENSE

3. SCOPE

4. in respect of Finance Lease arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest cost INCLUSIONS

5. INCLUSIONS – EXCHANGE DIFFERENCES Exchange differences part of BC to the extent of Exchange LOSS which does not exceed The DIFFERENCE between COST of borrowings in Functional Currency and COST of borrowings in Foreign Currency On Settlement / Translation of borrowings in future - In case of a realized or unrealized gain, the gain to the extent of loss previously recognized as an ADJUSTMENT (as above) should be recognized as an adjustment to interest.

6. INCLUSIONS – EXCHANGE DIFFERENCES (EXAMPLE)

7. ASSETS WHICH ARE QUALIFYING ASSETS

8. ASSETS WHICH ARE NOT QUALIFYING ASSETS

9. RECOGNITION BC are capitalized when it is probable that they will result in future economic benefits and costs can be measured reliably

10. MEASUREMENT – BC ELIGIBLE FOR CAPITALISATION Amount of BC Capitalized during a period shall NOT EXCEED the ACTUAL amount of BC incurred during that period

11. IMPARIMENT If the Carrying Amount of QA Expected ultimate cost of QA or EXCEEDS its Recoverable Amount Net Realizable Value (NRV) or Then Carrying Amount is WRITE-DOWN / WRITE-OFF in accordance with the requirement of other standards In certain circumstances, amount write-down / write-off is WRITTEN BACK in accordance with other standards

12. COMMENCEMENT, SUSPENSION & CESSATION OF CAPITALISATION COMMENCEMENT Meet all the following conditions: Incurred expenditure for the asset Incurred borrowing costs Undertakes activities to prepare the asset for its intended use / sale CESSATION Capitalization of BC is suspended during extended periods in which active development of qualifying asset is suspended. SUSPENSION An entity shall cease capitalizing BC, when: Substantially all the activities necessary to prepare the asset for its intended use / sale are complete .

13. COMPLETION OF QUALIFYING ASSET IN PARTS COMPLETION IN PARTS 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 / sale

14. DISCLOSURE

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