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Borrowing Costs

Ind AS - 023 - Rule - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 023 - Indian Accounting Standard (Ind AS) 23 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Core principle 1 that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other are recognised as an expense. Scope 2 .....

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in large quantities on a repetitive basis. Definitions 5 This Standard uses the following terms with the meanings specified: are interest and other costs that an entity incurs in connection with the borrowing of funds. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. 6 may include: (a) interest expense calculated using the effective interest method as described in Ind AS 109, Financial Instruments; (b) [Refer Appendix .....

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valent to the extent to which the exchange loss does not exceed the difference between the cost of borrowing in functional currency when compared to the cost of borrowing in a foreign currency. (ii) where there is an unrealised exchange loss which is treated as an adjustment to interest and subsequently there is a realised or unrealised gain in respect of the settlement or translation of the same borrowing, the gain to the extent of the loss previously recognised as an adjustment should also be .....

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ion 8 An entity shall capitalise that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. An entity shall recognise other as an expense in the period in which it incurs them. 9 that are directly attributable to the acquisition, construction or production of a qualifying asset are included in the cost of that asset. Such are capitalised as part of the cost of the asset when it is probable that they will result in future .....

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e qualifying asset had not been made. When an entity borrows funds specifically for the purpose of obtaining a particular qualifying asset, the that directly relate to that qualifying asset can be readily identified. 11 It may be difficult to identify a direct relationship between particular borrowings and a qualifying asset and to determine the borrowings that could otherwise have been avoided. Such a difficulty occurs, for example, when the financing activity of an entity is co-ordinated centr .....

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ying asset is difficult and the exercise of judgement is required. 12 To the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset, the entity shall determine the amount of eligible for capitalisation as the actual incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. 13 The financing arrangements for a qualifying asset may result in an entity obtaining borrowed funds and incurring assoc .....

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e amount of eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted average of the applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of that an entity capitalises during a period shall not exceed the amount of it incurred during that period. 15 In some circumstances, it is approp .....

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n off in accordance with the requirements of other Standards. In certain circumstances, the amount of the write-down or write-off is written back in accordance with those other Standards. Commencement of capitalisation 17 An entity shall begin capitalising as part of the cost of a qualifying asset on the commencement date. The commencement date for capitalisation is the date when the entity first meets all of the following conditions: (a) it incurs expenditures for the asset; (b) it incurs ; and .....

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rrying amount of the asset during a period, including previously capitalised, is normally a reasonable approximation of the expenditures to which the capitalisation rate is applied in that period. 19 The activities necessary to prepare the asset for its intended use or sale encompass more than the physical construction of the asset. They include technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits prior to .....

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sion of capitalisation 20 An entity shall suspend capitalisation of during extended periods in which it suspends active development of a qualifying asset. 21 An entity may incur 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 capitalisation. However, an entity does not normally suspend capitalising during a period when it carries out substant .....

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ntially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. 23 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. 24 When a .....

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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. Disclosure 26 An entity shall disclose: (a) the amount of capitalised during the period; and (b) the capitalisation rate used to determine the amount of eligible for capitalisation. Appendix A References to matters contained in other In .....

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