Capitalizing Interest

Your client is in the planning phase of a major plant expansion which will involve the construction of a new warehouse. The assistant controller does not believe thatinterest cost can be included in the cost of the warehouse because it is a financing expense. Others on the planning team believe that some interest cost can beincluded in the cost of the warehouse but no one could indentify the specific authoritative guidance for this issue. Your supervisor asks you to research thisissue

Q: What are the objectives of capitalizing interest? (i.e. be sure to address the differing accounting treatment—(1) interest is treated as a financing expense vs. (2)interest is capitalized into the cost of the asset.)


Expert Solution
No answers

Submit Your Answer