Currently, an entity is required to capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a ‘qualifying asset’ as part of the cost of that asset as per Indian Accounting Standard (Ind AS) 23, Borrowing Costs. Determination of borrowing costs eligible for capitalisation and inclusion of specific borrowings as part of general borrowings once the qualifying asset is ready for its intended use has been a matter of debate and interpretation. In this edition of Accounting and Auditing Update (AAU), we have included an article which discusses some of these issues relating to the accounting of borrowing costs.
In order to sustain in the rapidly growing economy, companies are required to raise capital. Raising equity on a periodic basis may lead to dilution of founder/promoter stake, which can be effectively addressed through use of Differential Voting Rights (DVRs) (prevalent internationally) as a mode of capital raising. The current regulatory regime does not permit issuance of DVR shares with higher or superior voting rights. However, subject to certain conditions, it is possible to issue shares with inferior (less than one vote per share) voting rights. The Securities and Exchange Board of India (SEBI) has constituted a group to conduct an in-depth study of the proposal of introduction of dual class shares in India. Our article provides an overview of the proposals of the group in its report for the issuance of DVR shares by companies in India.
As is the case each month, we have also included a regular round-up of some recent regulatory updates including Prudential Framework for Resolution of Stressed Assets issued by the Reserve Bank of India. The circular provides directions for early recognition, reporting and time bound resolution of stressed assets.