PPT: Accounting Standards (16) | Advanced Accounting for CA Intermediate PDF Download

 Page 1


ACCOUNTING STANDARD-16
BORROWING COSTS
Page 2


ACCOUNTING STANDARD-16
BORROWING COSTS
2
OBJECTIVE & SCOPE
       
•
       To prescribe the accounting treatment for borrowing costs
•
       Does not deal with the actual or imputed cost of owners’ 
        equity,  including preference share capital not classified as a 
        liability
Page 3


ACCOUNTING STANDARD-16
BORROWING COSTS
2
OBJECTIVE & SCOPE
       
•
       To prescribe the accounting treatment for borrowing costs
•
       Does not deal with the actual or imputed cost of owners’ 
        equity,  including preference share capital not classified as a 
        liability
3
Ascertain whether
 there is a borrowing
AS-16 not 
applicable
Is it a general 
borrowing
Is it a specific 
borrowing for acquisition 
of a qualifying asset
Whether borrowing 
costs have been
incurred
Capitalise &
disclose 
Expense off the 
borrowing cost
             
          
OVERVIEW
No
No
Yes
No
     Yes
Yes
No
Yes
Yes
•
Are borrowing costs directly     attributable 
to the construction / acquisition / production 
of a qualifying asset
•
Are funds, that are generally borrowed, 
used for obtaining a qualifying asset 
Page 4


ACCOUNTING STANDARD-16
BORROWING COSTS
2
OBJECTIVE & SCOPE
       
•
       To prescribe the accounting treatment for borrowing costs
•
       Does not deal with the actual or imputed cost of owners’ 
        equity,  including preference share capital not classified as a 
        liability
3
Ascertain whether
 there is a borrowing
AS-16 not 
applicable
Is it a general 
borrowing
Is it a specific 
borrowing for acquisition 
of a qualifying asset
Whether borrowing 
costs have been
incurred
Capitalise &
disclose 
Expense off the 
borrowing cost
             
          
OVERVIEW
No
No
Yes
No
     Yes
Yes
No
Yes
Yes
•
Are borrowing costs directly     attributable 
to the construction / acquisition / production 
of a qualifying asset
•
Are funds, that are generally borrowed, 
used for obtaining a qualifying asset 
4
DEFINITIONS
•
   Borrowing costs are interest and other costs incurred by an   
   
    enterprise in connection with the borrowing of funds
•
   Qualifying asset is an asset that necessarily takes a 
     substantial period of time to get ready for its intended 
     use or sale
Page 5


ACCOUNTING STANDARD-16
BORROWING COSTS
2
OBJECTIVE & SCOPE
       
•
       To prescribe the accounting treatment for borrowing costs
•
       Does not deal with the actual or imputed cost of owners’ 
        equity,  including preference share capital not classified as a 
        liability
3
Ascertain whether
 there is a borrowing
AS-16 not 
applicable
Is it a general 
borrowing
Is it a specific 
borrowing for acquisition 
of a qualifying asset
Whether borrowing 
costs have been
incurred
Capitalise &
disclose 
Expense off the 
borrowing cost
             
          
OVERVIEW
No
No
Yes
No
     Yes
Yes
No
Yes
Yes
•
Are borrowing costs directly     attributable 
to the construction / acquisition / production 
of a qualifying asset
•
Are funds, that are generally borrowed, 
used for obtaining a qualifying asset 
4
DEFINITIONS
•
   Borrowing costs are interest and other costs incurred by an   
   
    enterprise in connection with the borrowing of funds
•
   Qualifying asset is an asset that necessarily takes a 
     substantial period of time to get ready for its intended 
     use or sale
5
BORROWING COSTS 
•
         Interest and commitment charges on bank & other short term 
          borrowings
•
        Amortisation of discounts or premiums relating to    
          borrowings
•
        Amortisation of ancillary costs incurred in connection with 
          the arrangement of borrowings
•
        Finance charges of assets acquired under finance leases or 
         under other similar arrangements
•
        Exchange differences arising from foreign currency 
         borrowings to the extent that they are regarded as an    
         adjustment to interest costs