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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Which statement about the definition of a qualifying asset and borrowing costs under Ind AS 23 is correct?

A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. Borrowing costs are wider than cash interest, covering interest and other costs an entity incurs in connection with borrowing funds.

  1. AA qualifying asset is any asset that is financed through borrowings, irrespective of time taken
  2. BA qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or saleCorrect
  3. CBorrowing costs are only the interest paid in cash on bank loans
  4. DBorrowing costs exclude any other costs incurred in connection with borrowing funds

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. Borrowing costs are interest and other costs incurred in connection with borrowing funds, so they are not limited to cash interest on bank loans.

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