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The company has general  10%bank loan$ 6000 and 2%special loan 1000 .unused fund was put in to the bank earning interest at3% per annum
And the expenditures incurred:
1 may 2000
1 October 4000
 The work has been suspended by labour strike  from 1 April to 31may
Do I have to suspend the capitalization of borrowing cost?
And what is the interests of the borrowing cost?
in IAS 23 - Borrowing Costs by
edited

1 Answer

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Yes the borrowing cost has to be suspended from being capitalized as per paragraph 20 of IAS 23.
Since the work was suspended and no active development of the asset took place during the period since during such an extended period necessary activities were not carried out.
The borrowing cost to be capitalized shall be the net amount of borrowing cost incurred less any income from the fund unutilized borrowed for the purpose of asset development additionally any amount of borrowing cost incurred during the extended period for April 1 to May 31 shall not be taken into account when calculating borrowing cost as per paragraph 12 & 20 of IAS 23.
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