Page 127 - IC26 LIFE INSURANCE FINANCE

ACCOUNTING STANDARDS - 16

BORROWING COSTS

Applicability: Mandatory for all enterprises w.e.f. 01/04/2000.

Borrowing Costs include:

 Interest and commitment charges on borrowings

 Amortization of discounts or premiums relating to borrowings

 Amortisation of ancillary costs incurred in connection with the arrangement of

borrowings

 Exchange difference arising from borrowings to the extent it amounts to interest costs.

 Borrowing costs should be recognized as an expense in the period in which they are

incurred.

 Borrowing costs that are directly attributable to the acquisition, construction or

production of a qualifying asset should be capitalized as part of that asset.

Qualifying Asset is an asset that necessarily takes a substantial period of time to get ready for

its intended use or sale. e.g. Heavy Plant & Machinery.

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