Company A is a service providing industry in aviation sector. Financial year for company A runs from 1 April to 31 March.
In 1st Jan 2017 A entered into a contract with aircraft manufacturing company B for the purchase of one Airplane costing $200million, out of this 40 million need to be paid on 15 Jan for starting manufacturing of Aircraft and the remaining $160 million on delivery date 30 June 2017.
On the other side Company A entered into annual 8% loan agreement with financial institution F for the same amount of $200 million.
A has paid advance of $40 million burrowing from F as per loan agreement to B on 15 Jan 2017 and Airplane is under construction.
Assume today is 1st of April, what will be the treatment for the interest of $20 million on financial statement?
