AS - 16 - Borrowing Costs

Accounting Standard 16: Capitalize Borrowing Costs for Qualifying Assets; Expense Otherwise; Disclosure Required

Accounting Standard (AS) 16 outlines the treatment of borrowing costs, which include interest and related expenses incurred in fund borrowing. The standard mandates capitalizing borrowing costs directly attributable to acquiring, constructing, or producing qualifying assets, such as manufacturing plants or investment properties, which require a substantial period to be ready for use or sale. Borrowing costs are recognized as expenses if not directly linked to qualifying assets. Capitalization begins when expenditures and borrowing costs are incurred, and necessary activities are underway. It ceases when the asset is ready for use or sale. Disclosure of the adopted accounting policy and capitalized borrowing costs is required.