ICDS IX – Borrowing Costs


Deals with treatment of borrowing cost.

Does not deal with the actual or imputed cost of owner’s equity and preference share holder.



      Borrowing cost: are interest and other costs incurred by a person in connection with the borrowing of funds and include:

(a)    Commitment charges on borrowings;

(b)    Amortised amount on discounts or premiums relating to borrowings;

(c)     Amortised amount 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.

      Qualifying asset : means

(a)    Land, building, machinery, plant or furniture, being tangible assets;

(b)    Know-how, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature, being intangible assets;

(c)     Inventories that require a period of twelve months or more to bring them to saleable condition.


Eligible for Capitalisation



  • Accounting policy followed for treatment of borrowing cost
  • Amount of borrowing cost capitalised during the period

Key difference with AS

  • Qualifying asset are specifically defined in IcdS whereas in AS 16 it is any asset that takes substantial period (12 months) of time to ready for its intended use.
  • Income from temporary investments of borrowing is treated as income as per the ACT, in AS 16 it is reduced from the borrowing cost to be capitalised.
  • ICDS uses proportionate method for capitalisation whereas AS uses weighted average method.

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