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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Sagar Shipyards Ltd is evaluating which of its assets are qualifying assets under Ind AS 23. Which of the following is a qualifying asset?

The vessel built over two years is a qualifying asset, because Ind AS 23 defines a qualifying asset as one that necessarily takes a substantial period of time to get ready for its intended use or sale. Quickly made inventory, ready-to-use machines and financial investments do not meet this test.

  1. AA cargo vessel being built for the company's own use that will take about two years to completeCorrect
  2. BFinished goods inventory produced repeatedly in large quantities over a few days each
  3. CA machine bought from a dealer that is ready for use on the date of purchase
  4. DAn investment in the equity shares of a listed company

Explanation

A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. A vessel built over two years meets this test. Quickly produced inventory and a machine ready on purchase need no substantial period, and a financial investment is not prepared for use or sale.

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