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What is Borrowing costs? Briefly indicate Some items include in Borrowing costs?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 ROSHNI asked about 3 years ago

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6 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

Dear friend, --Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. The borrowing costs that are directly attributable to the acquisition,construction or production of a qualifying asset are those borrowing costs that would have been avoided if the expenditure on the qualifying asset had not been made. When an enterprise borrows funds specifically for the purpose of obtaining a particular qualifying asset, the borrowing costs that directly relate to that qualifying asset can be readily identified. As per para 4 of AS 16 on Borrowing Costs, borrowing costs may include: (a) Interest and commitment charges on bank borrowings and other short-term and long-term borrowings; . (b) Amortization of discounts or premiums relating to borrowings ; (c) Amortization of ancillary costs incurred in connection with the arrangement of borrowings; (d) Finance charges in respect of assets acquired under finance leases or under other similar arrangements; and (e) Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

The expenses for taking on a debt obligation that can involve interest payments and other financing fees. The borrowing cost for a business tends to go up when prevailing market interest rates are rising during times of economic expansion and increased inflation, even if its credit standing remains excellent. Borrowing cost may include interest expense calculated by the effective interest method under IAS 39, finance charges in respect of finance leases recognised in accordance with IAS 17 Leases, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs Thanks

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Picsjoin 2017224123730582 Archana answered about 3 years ago

Hie Roshni, **Borrowing cost can be defined as :-** As Per AS-16, Borrowing Cost is the interest and other cost which is incurred by an enterprise in relation to borrowing of funds. Borrowing Costs requires that borrowing costs directly attributable to the acquisition, construction or production of a 'qualifying asset' (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included in the cost of the asset. Other borrowing costs are recognised as an expense. **Borrowing cost may include:-** - Interest expense calculated by the effective interest method , - Finance charges in respect of finance leases recognised in accordance with IAS 17 Leases, - Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

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Data?1494421738 samkit kothari answered about 3 years ago

The borrowing costs that are directly attributable to the acquisition,construction or production of a qualifying asset are those borrowing costs that would have been avoided if the expenditure on the qualifying asset had not been made. When an enterprise borrows funds specifically for the purpose of obtaining a particular qualifying asset, the borrowing costs that directly relate to that qualifying asset can be readily identified. As per para 4 of AS 16 on Borrowing Costs, borrowing costs may include: (a) Interest and commitment charges on bank borrowings and other short-term and long-term borrowings; . (b) Amortization of discounts or premiums relating to borrowings ; (c) Amortization of ancillary costs incurred in connection with the arrangement of borrowings; (d) Finance charges in respect of assets acquired under finance leases or under other similar arrangements; and (e) Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Vinod.P answered about 3 years ago

Dear Roshni Borrowing cost means the cost incurred in a business or enterprises in connection with borrowing of funds. Examples are Interest ,Finance Charges, Processing Charges etc on Loans.Borrowing costs may include the following (a) interest and commitment charges on bank borrowings and other short-term and long-term borrowings; (b) amortization of discounts or premiums relating to borrowings; (c) amortization of ancillary costs incurred in connection with the arrangement of borrowings; (d) finance charges in respect of assets acquired under finance leases or under other similar arrangements; and (e) exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowing costs which are directly attributable towards the acquisition, construction, or production of an asset and be capitalized as a part of cost of asset. Others will be considered as normal revenue expense and debited to the Profit and loss account. Kind Regards Vinod.P

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Data?1494421730 rohit awasthi answered about 3 years ago

Hii Roshni Borrowing costs: Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. As per para 4 of AS 16 on Borrowing Costs, borrowing costs may include: (a) Interest and commitment charges on bank borrowings and other short-term and long-term borrowings; . (b) Amortization of discounts or premiums relating to borrowings ; (c) Amortization of ancillary costs incurred in connection with the arrangement of borrowings; (d) Finance charges in respect of assets acquired under finance leases or under other similar arrangements; and (e) Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset• should be capitalized as part of the cost of that asset. Other borrowing costs should be recognized as an expense in the period in which they are incurred. The capitalization of borrowing costs as part of the cost of a qualifying asset should commence when the conditions specified in AS 16 are satisfied. Thanks

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