Section 16 in The Companies (Cost records and audit) Rules, 2014
16. Finance Costs.-
(a)Finance costs are interest and other costs incurred by an entity in connection with the financing arrangements and shall be measured in accordance with the accounting standards applicable for the time being in force.(b)Finance costs incurred shall be identified fori) acquisition or construction or production of qualifying assets including fixed assets; andii) Other finance costs for production of goods or operations or services rendered which cannot be classified as qualifying assets.(c)Finance costs directly attributable to the acquisition or construction or production of a qualifying asset shall be included in the cost of the asset.(d)Finance costs shall not include imputed costs.(e)Subsidy or grant or incentive and any such payment received or receivable with respect to finance costs shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income.(f)Penal interest for delayed payment, fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the finance costs. In case the company delays the payment of statutory dues beyond the stipulated date, interest paid for delayed payment shall not be treated as penal interest.(g)Interest paid for or received on investment shall not form part of the finance costs for production of goods or operations or services rendered;(h)Assignment of finance costs to the cost objects shall be based on either of the following two principles namely:-(i)Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost and(ii)Benefits received - to be apportioned to the various cost objects in proportion to the benefits received by them.
