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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Bharat Holdings Ltd has several subsidiaries. Some subsidiaries raise their own loans at very different rates, while others rely on funds raised by the parent. The group accountant asks how Ind AS 23 deals with the weighted average of borrowing costs for a group. Which statement agrees with the standard?

Ind AS 23 leaves the choice to circumstances. Sometimes it is appropriate to compute one weighted average over all borrowings of the parent and subsidiaries, and sometimes each subsidiary should use the weighted average of its own borrowings. No single method is mandated for every group.

  1. AThe weighted average must always include all borrowings of the parent and its subsidiaries
  2. BEach subsidiary must always use only the weighted average of its own borrowings
  3. CIn some circumstances it is appropriate to include all group borrowings, and in others each subsidiary should use the weighted average of its own borrowingsCorrect
  4. DThe weighted average must always be based only on the parent's borrowings

Explanation

Ind AS 23 recognises that circumstances differ. In some cases it is appropriate to include all borrowings of the parent and its subsidiaries in the weighted average, and in others each subsidiary should use the weighted average of its own borrowings. The options using 'always' or 'only the parent' impose a fixed rule that the standard does not.

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