Skip to content

CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Chola Infra Ltd took a Rs 20 crore loan at 10% p.a. specifically for building a toll plaza (qualifying asset). The full amount was drawn on 1 April, but only Rs 12 crore was spent immediately; the remaining Rs 8 crore was invested in a short-term deposit earning 6% p.a. and fully spent after 6 months. Construction continued all year. Assuming no other borrowings, what is the borrowing cost capitalised for the year?

Rs 1.76 crore is capitalised. Interest on the specific loan is Rs 2.00 crore for the year. Income from temporarily investing Rs 8 crore at 6% for six months is Rs 0.24 crore, which Ind AS 23 requires to be deducted, leaving Rs 1.76 crore.

  1. ARs 2.00 crore
  2. BRs 1.76 croreCorrect
  3. CRs 1.52 crore
  4. DRs 2.24 crore

Explanation

Actual interest = 20 crore x 10% = Rs 2.00 crore. Investment income = 8 crore x 6% x 6/12 = Rs 0.24 crore. Capitalised = 2.00 - 0.24 = Rs 1.76 crore. Rs 2.00 crore ignores investment income; Rs 2.24 crore adds it wrongly; Rs 1.52 crore deducts it twice.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 23 Borrowing Costs shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 23 Borrowing CostsFree diagnostic mock

More Ind AS 23 Borrowing Costs questions