A pause in site work is not always a pause in capitalisation
Ind AS 23 paragraphs 20–25 require capitalisation to stop during extended suspensions of active development, but distinguish substantial technical or administrative work and necessary temporary delays. Capitalisation ends when substantially all preparation for intended use or sale is complete, including separately usable completed parts. This guide applies to Ind AS reporters using FY 2026–27 model facts, checked on 27 October 2026 against ICAI’s compendium and the subsequent 2026 amendment notification. ICAI Ind AS 23: paragraphs 17–26.
Start with an eligible project, then map its timeline
Before classifying a pause, establish that the asset qualifies and the commencement conditions in paragraph 17 have been met. A project manager’s label of capital project does not settle those conditions. Record the work undertaken, the reason for interruption, whether substantive preparation continued and the date activity resumed.
Evidence matters more than the accounting status code
Minutes, engineer reports, permit activity, design changes, contractor correspondence and site records can explain what happened. Technical work may continue while physical work pauses. Conversely, a nominal project-team presence does not demonstrate substantial preparation. The standard sets no universal number of days that makes a suspension extended; reach and document a judgment for the facts.
Differentiate a necessary delay from indefinite holding
Paragraph 21 gives a geographical high-water example where a common seasonal delay forms a necessary part of bridge construction. That is not a blanket seasonal exception for every abandoned or stalled project. Document why the delay belongs to the preparation process rather than merely allowing the owner to hold a partially completed asset.
Use readiness and dependency tests for cessation
A remaining routine administrative task or minor decoration should not by itself keep capitalisation open. For a multi-part project, examine whether the completed part can actually be used while other parts remain under construction. An integrated plant needing sequential processes differs from independent buildings. Record the evidence behind that distinction rather than allocating interest solely according to a physical completion percentage.
Reconcile capitalised amounts to actual borrowing costs
Keep the funding calculation separate from the time-window judgment. The examples assume stated costs are properly measured actual borrowing costs attributable to the stated asset, with no investment income or other financing adjustments. They deliberately use agreed equal monthly costs or explicit costs by part; they do not replace an effective-interest schedule, general-pool allocation or daily accrual calculation. Complete the capitalised-cost and rate disclosures under paragraph 26 and retain the bridge to expensed costs.
Applicable primary references
ICAI Ind AS 23: paragraphs 17–26 MCA Gazette notification, 12 August 2026: subsequent Ind AS amendments
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Extended inactive period
A qualifying asset incurs equal actual attributable borrowing costs of ₹10,000 each month for 12 months. An evidence-based conclusion identifies three full months of extended inactivity with no substantial preparation work or necessary-delay exception. Expense ₹30,000 for that pause and capitalise ₹90,000 for the other nine eligible months. Total borrowing costs remain ₹1,20,000.
Illustrative example 2: Substantial design work continues
Equal actual costs are ₹8,000 a month for 12 months. Physical work pauses for two months, but substantial necessary redesign continues and all other eligibility conditions remain met. Assuming no later cessation or other exclusion, ₹96,000 remains capitalisable; the two-month component is ₹16,000. The result follows the work evidence, not a universal redesign exception.
Illustrative example 3: Necessary seasonal delay
A bridge has ₹15,000 actual attributable cost per month for 12 months, including two months of common local high-water delay that is a necessary part of the construction process. Assuming paragraph 21’s facts are established and all other months qualify, capitalise ₹1,80,000, including ₹30,000 during that delay. An unusual indefinite shutdown would need a different analysis.
Illustrative example 4: Ready before the last routine task
Costs are ₹12,000 per month for the April–March accounting year. Substantially all preparation is complete on 31 December 2026; only routine administration remains through March 2027. With nine eligible April–December months, capitalise ₹1,08,000 and expense ₹36,000 for January–March. Total costs are ₹1,44,000.
Illustrative example 5: Independently usable buildings
Building A has attributable actual borrowing costs of ₹6,000 a month and is ready on 30 September; Building B has ₹4,000 a month and is ready on 31 March. Both qualified from 1 April and A can be used independently. Capitalise ₹36,000 for A and ₹48,000 for B, total ₹84,000. The remaining ₹36,000 of A’s full-year ₹72,000 cost is expensed on these assumptions.
Illustrative example 6: One integrated asset
Two interdependent processing sections form one qualifying integrated plant. One section is physically complete on 30 September but cannot be used for intended operations without the other, ready on 31 March. Equal actual attributable costs of ₹20,000 per month remain eligible throughout the 12-month preparation period, assuming no suspension or other exclusion: ₹2,40,000. Physical half-completion alone does not justify ending half the capitalisation.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the reporting framework | Ind AS applicability and current standard |
| 2 | Confirm the qualifying asset | Preparation needs and scope assessment |
| 3 | Confirm commencement conditions | Expenditure, costs and necessary activities |
| 4 | Create a dated activity timeline | Engineering and project records |
| 5 | Identify extended inactive periods | Reason, duration and absence of preparation |
| 6 | Test continuing substantial work | Technical and administrative evidence |
| 7 | Test necessary temporary delays | Process and geographical support |
| 8 | Test readiness and usable parts | Completion and dependency evidence |
| 9 | Reconcile capitalised and expensed costs | Funding calculation and time-window bridge |
| 10 | Complete disclosure and retain judgments | Amount, rate and documented conclusions |
Sixteen practitioner FAQs
1. Is every construction stoppage a suspension for accounting?
No. Examine the nature of development activity and paragraph 21’s distinctions.
2. Does the standard specify a universal thirty-day pause rule?
No. Do not invent a fixed duration; document the extended-period judgment.
3. Can administrative work support continued capitalisation?
Substantial necessary technical or administrative work may do so; routine activity labels alone are insufficient.
4. What is wrong with using project status codes alone?
They may not explain the actual activity, cause or readiness of the asset.
5. Are all monsoon delays automatically eligible?
No. Establish whether the temporary delay is a necessary part of preparation on the actual facts.
6. Does indefinite land holding qualify as development?
Mere holding without relevant preparation does not establish an active capitalisation period.
7. Must a loan be repaid before capitalisation ceases?
No. The relevant completion test is readiness, not repayment.
8. Can minor decoration keep the window open?
Paragraph 23 indicates minor remaining modifications can be consistent with substantial completion.
9. What if a routine certificate file remains open?
Examine whether anything necessary for intended use remains; routine administration alone should not dictate the result.
10. Can a completed building stop separately?
Yes, where the part is capable of being used while other parts remain under construction and preparation is substantially complete.
11. Does a physically complete section of an integrated plant stop separately?
Not merely because it is physically complete; assess dependency and intended usability.
12. Are the example monthly rates prescribed by Ind AS?
No. They are fictional actual-cost assumptions chosen to isolate the timing issue.
13. Should the window test replace the borrowing-cost calculation?
No. Determine properly measured eligible funding costs separately, then apply the supported window.
14. Can the total capitalised exceed actual borrowing costs incurred?
The standard’s actual-cost limit remains relevant; reconcile the funding calculation and expenses.
15. What does paragraph 26 require for this working?
Disclose capitalised borrowing costs and the capitalisation rate used, supported by the final calculation.
16. What is the most valuable review evidence?
A dated project timeline that connects each pause, continuing activity and readiness decision to the cost bridge.
Conclusion
Use project evidence to separate extended inactivity from necessary delays, and stop capitalisation when substantially complete assets or usable parts are ready.