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CMA Final · Corporate Financial Reporting · Borrowing Costs (Ind AS 23)

Under Ind AS 23, which of the following best describes a 'qualifying asset'?

A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. Qualification depends on this preparation period, not on how the asset is financed or on its size relative to total assets.

  1. AAny asset acquired by an entity using borrowed funds
  2. BAn asset that necessarily takes a substantial period of time to get ready for its intended use or saleCorrect
  3. CAn asset whose cost exceeds 10% of the entity's total assets
  4. DAn asset that is financed only through specific borrowings

Explanation

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. Funding source or relative size does not decide qualification. Option A is wrong because an asset bought with borrowings that is ready immediately does not qualify.

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