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AS 10
Accountancy
Sir what if this deferred credit is for normal credit terms. Say credit of 500000 is deferred for 4 years. If its extended over 4 years say payable at end of 6th year is 6L then int is 1L and it will be capitalised if such asset is qualifying. So what is this deferred credit. Is it always beyond normal credit period or otherwise? How does the standard interpret this? In ques 6 what should we assume?
Answers (3)
Say if a supplier sells an equipment at Rs. 100000 whether you pay cash upfront or pay after 90 days. This is the normal credit term. Generally if the credit period is beyond normal credit terms the supplier would charge extra amount towards interest. That interest represents borrowing cost. Here since plant is not a qualifying asset, it is not capitalised.
