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    Question

    As per AS 16, borrowing costs that are directly

    attributable to the acquisition, construction, or production of a qualifying asset should be:
    A Expensed in the period they are incurred. Correct Answer Incorrect Answer
    B Capitalized as part of the cost of that asset. Correct Answer Incorrect Answer
    C Treated as deferred revenue expenditure. Correct Answer Incorrect Answer
    D Charged to Capital Reserve. Correct Answer Incorrect Answer
    E Adjusted against Securities Premium Account. Correct Answer Incorrect Answer

    Solution

    According to AS 16, borrowing costs directly related to a qualifying asset (one that takes a substantial period to get ready) must be capitalized.

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