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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Ind AS 23 defines borrowing costs as interest and other costs that an entity incurs in connection with the borrowing of funds. Nila Ltd incurred loan processing fees and interest on a term loan taken to build a qualifying warehouse. Which statement is correct?

Both interest and processing fees are borrowing costs. Ind AS 23 defines borrowing costs as interest and other costs an entity incurs in connection with borrowing funds, so loan processing charges qualify, with no cash-payment or size condition.

  1. ABoth interest and processing fees are borrowing costs because they are costs incurred in connection with borrowing fundsCorrect
  2. BOnly interest is a borrowing cost; processing fees are always expensed
  3. COnly costs paid in cash during the period are borrowing costs
  4. DProcessing fees are borrowing costs only if the loan exceeds Rs 10 crore

Explanation

The definition covers interest and other costs incurred in connection with borrowing, which includes loan processing charges. There is no size threshold or cash-only restriction. Treating fees as always expensed ignores the 'other costs' wording.

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