alleryBorrowing costs may be included in inventory cost when:
AProduction cycle is short
BCycle is long enough (wine etc.)
CGoods are imported items
DClosing stock is overvalued
Answer & Solution
Correct answer: B. Cycle is long enough (wine etc.)
1. AS 2 generally excludes borrowing costs from inventory.
2. An exception is when production cycle is long (e.g., wine, rice, timber) and AS 16 capitalisation criteria are met.
3. Hence borrowing costs may then form part of inventory cost.
_Source: ICAI BoS Foundation Paper 1, Ch 4 "Inventories", §3 ¶6_
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