In short
Capitalized interest is interest cost incurred while a qualifying asset, such as a building constructed for the company's own use, is being prepared for use. It is added to the asset's cost instead of being expensed.
Key takeaways
- The amount is the interest that could have been avoided, based on weighted-average accumulated expenditures.
- It can't exceed the actual interest incurred in the period.
- Assets already in use, or routinely produced inventory, don't qualify.
Where it's tested
FAR: Property, Plant & Equipment — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
During construction of a qualifying asset, the amount of interest capitalized is the: