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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Which of the following best describes a qualifying asset under Ind AS 23, as in the context of a company constructing assets?

A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. The test is the preparation period required by the asset, not how it is financed, its size, or a fixed twelve-month threshold.

  1. AAn asset that necessarily takes a substantial period of time to get ready for its intended use or saleCorrect
  2. BAny asset financed wholly by borrowed funds, regardless of the time needed to prepare it
  3. CAny item of property, plant and equipment with a cost above the materiality limit
  4. DAn asset that takes more than twelve months to construct, whatever its nature

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. Financing method, size or a fixed twelve-month rule is not the test. The distractor on financing confuses the source of funds with the nature of the asset.

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