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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Bharat Power Ltd is reviewing which of its assets could be a qualifying asset under Ind AS 23, which defines it as an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Which of the following items clearly meets that definition?

The thermal power unit under construction for about three years is the qualifying asset. Ind AS 23 defines a qualifying asset as one that necessarily takes a substantial period to get ready for its intended use or sale. Quickly produced inventory, ready-to-use assets and receivables do not satisfy this requirement.

  1. AA thermal power unit whose construction necessarily takes about three years before commissioningCorrect
  2. BFinished-goods inventory that is manufactured routinely in a few days
  3. CA plant purchased and installed, ready for use on the day of purchase
  4. DTrade receivables held at the reporting date

Explanation

A qualifying asset necessarily takes a substantial period to get ready for its intended use or sale. A three-year power unit construction meets this. Routinely made short-cycle inventory and assets ready for use on acquisition do not take a substantial period, and receivables are not prepared for use or sale.

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