CMA Intermediate · Financial Accounting · Borrowing Costs (AS 16)
Under AS 16, which borrowing costs are regarded as directly attributable to a qualifying asset?
Directly attributable borrowing costs are those that would have been avoided had the expenditure on the qualifying asset not been made. When funds are borrowed specifically for a particular qualifying asset, these costs can be readily identified.
- AThose that would have been avoided if the expenditure on the qualifying asset had not been madeCorrect
- BAll interest paid by the enterprise during the year
- COnly costs incurred after the asset is ready for use
- DOnly the imputed cost of owners' funds
Explanation
AS 16 says directly attributable borrowing costs are those that would have been avoided if the expenditure on the qualifying asset had not been made. Total interest of the year is not automatically attributable, and equity cost is outside the standard.
Did you get it right without looking?
One question tells you little. A timed set on Borrowing Costs (AS 16) shows your real accuracy, how long you take and where you lose marks.
More Borrowing Costs (AS 16) questions
- Which item falls outside the scope of AS 16 Borrowing Costs?
- Under AS 16, which of the following is the correct description of the capitalisation rate to be applied to expenditure on a qualifying asset…
- Which statement best describes the limit on borrowing costs capitalised for a period when funds are borrowed generally?
- Sundaram Textiles Ltd borrowed Rs 80,00,000 at 10% p.a. specifically to build a new weaving unit. During the year, interest incurred on this…
- Under AS 16, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are to be t…
- Sundaram Builders borrowed funds at 12% p.a. and bought land for building purposes on 1 April. No development activity took place on the lan…