Borrowing Costs

What is Borrowing costs

Borrowing costs simply the cost of borrowing of funds and primarily these cost are interest charged by the lender, however, those cost may also include the cost necessary to arrange the borrow.
Accounting Treatment of Borrowing Costs.

Accounting Treatment of Borrowing Cost

Borrowing cost are charged as expenditure in the related period , however, in case funds are borrowed to construct an asset which takes substantial time for its completion, then, such costs are capitalized.

 It is important to remember that during the suspension period of construction and upon completion of construction no borrowing cost will be capitalized. furthermore, any temporary investment income from the investment of borrowed fund is deducted.

What are condition of Capitalizing the borrowing Cost

Conditions for capitalization of borrowing costs.

1. Assets takes substantial time for its completion
2. interest is being incurred against such borrowing
3. Construction is being constructed