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      Question

      Borrowing Costs" under accounting standards (IAS 23/AS

      16) include which of the following?
      A Dividend payments on preference shares. Correct Answer Incorrect Answer
      B Amortization of discounts or premiums related to borrowings. Correct Answer Incorrect Answer
      C Equity risk premium. Correct Answer Incorrect Answer
      D Opportunity cost of using the company's own cash. Correct Answer Incorrect Answer
      E Principal repayment of the loan. Correct Answer Incorrect Answer

      Solution

      Borrowing costs are not just "interest rate" payments; they include ancillary costs like the amortization of discounts/premiums and exchange differences arising from foreign currency borrowings to the extent they are an adjustment to interest costs. Amortization of discounts or premiums related to borrowings: Included as it is a cost connected with the arrangement of borrowed funds.

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