Can interest be included in the cost of inventories?

Paragraph 6 of AS 16 states that "Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should be capitalised as part of the cost of that asset". Paragraph 3 of AS 16 defines a qualifying asset as "an asset that necessarily takes a substantial period of time to get ready for its intended use or sale". Further, "inventories that require a substantial period of time to bring them to a saleable condition" are specifically included as an example of qualifying assets (paragraph 5). In this context, it may be noted that ICAI has issued Accounting Standards Interpretation (ASI) 1, 'Substantial Period of Time', paragraphs 5 and 8 of which state as below: "5. In case of inventories, substantial period of time is considered to be involved where time is the major factor in bringing about a change in the condition of inventories. For example, liquor is often required to be kept in store for more than twelve months for maturing." "8. Paragraph 5 of AS 16 provides, inter alia, that "inventories that are routinely manufactured or otherwise produced in large quantities on a repetitive basis over a short period of time, are not qualifying assets." Paragraph 12 of Accounting Standard (AS) 2, Valuation of Inventories, provides that "Interest and other borrowing costs are usually considered as not relating to bringing the inventories to their present location and condition and are, therefore, usually not included in the cost of inventories". It is only in exceptional cases, where time is a major factor in bringing about change in the condition of inventories that borrowing costs are included in the valuation of inventories." Thus, interest costs should be included in the cost of inventories, which meet the definition of qualifying assets, in accordance with the provisions of AS 16.