## General Borrowings – Definition
All borrowings that are not taken specifically for a qualifying asset. The qualifying asset is funded from a pool of general borrowings.
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## Two-Step Calculation
### Step 1: Calculate the Capitalisation Rate (Weighted Average Cost of Capital)
$$\text{Capitalisation Rate} = \frac{\text{Total Interest (Weighted Avg)}}{\text{Total Borrowings (Weighted Avg)}} \times 100$$
- Use all general borrowings outstanding during the period
- Weight each borrowing by its principal amount
- Exclude specific borrowings from this calculation entirely
- If a loan starts mid-year, weight its principal proportionally (months/12)
### Step 2: Calculate Borrowing Cost to be Capitalised
$$\text{BC} = \text{Expenditure} \times \text{Cap Rate} \times \frac{\text{Months Outstanding}}{12}$$
- Apply to each tranche of expenditure separately
- Time-weight from the date of expenditure to the end of construction period
- Sum across all tranches for total borrowing cost capitalised
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## Important Ceiling Rule
> Total borrowing cost capitalised cannot exceed the actual total borrowing costs incurred on general borrowings during the period.