IAS 23 Borrowing cost.

IAS 23 governs and regulates the extent to which entities are allowed to
capitalize borrowing costs incurred on money borrowed to finance the
acquisition of only qualifying asset.
(qualifying asset are those assets which takes a substantial period of time to
be ready for its intended use)Examples PPE and investment property during its
construction period, intangible assets during its construction, made-to-order
inventories taking substantial time to be made
( qualifying asset kinna ko laagi loan leeyo hare aba tyo loan ko interest is
directly attributable to the asset so what accounting should to done to it ??
whether we should add the interest as an expense in spl or should we
capitalize the asset to increae its value as these costs are the costs related to
it)( OR if I had a house made with loan and I want to sell it so should I sell it in
such costs to cover my interest or not? Yes I should ie capitalization of interest
costs occurs.)
The capitalization of the asset should be started when all the below criteria are
met
 Expenditure on the asset is being incurred
 Borrowing costs are being incurred
 Activities that are necessary to prepare the asset for its intended use or
sale are in progress.
(ie eaaa hawa taalmai qualifying asset banaune bala xu vanera capitalization
garna bhayena, asset banauna expenses lik labour or contract costs haru hudai
gareko hunu paryo + borrowing costs jun ma capitalize garne bhaanya x ani tyo
ma interest teerdai garya huna paryo and activities to prepare the assets
should be in progress.)
Capitalization must stop when the asset is ready for its use (whether or not it is
being used) or when there is no active construction.

The rate of interest to be taken when funds are borrowed to acquire a

qualifying asset, the costs which may be capitalized are those actually charged,
less any investment income on the temporary investment of the borrowings
during the capitalization period.
Qstn A is completed constructing a plant at 31dec 2015. A had obtained loan
10,00,000 at 1 jan 2015 at 15% for constructing it. At 31 dec the other
outstanding loans were 18% 5 yr 15,00,000, 14% debenture 10,00,000.
Expenditures on project were 2015.03.31 6,00,000, 2015.06.30 8,00,000,
2015.12.31 3,00,000.During the yr A had invested a part of loan for 2 mnth at
9%. Find the cost to be capitalized.