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Codification Topic 835-20: Capitalization of Interest



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Codification Topic 835-20
Capitalization of Interest


Capitalization of interest

SFAS 34, October 1979
"Capitalization of Interest"

Qualifying assets for interest capitalization
1. Assets that are constructed or produced
--> for the entity's own use

2. Assets that are constructed or produced
--> for sale or lease as discrete projects

Interest cost is not capitalized 
--> for inventories

Amount of interest to be capitalized
1. Amount to be capitalized
--> average accumulated expenditures x capitalization rate

2. Total amount of interest cost capitalized
--> cannot exceed the total interest cost incurred

Capitalization rate
1. Specific borrowings for the construction
--> interest rate for specific borrowings

2. For the average accumulated expenditures over the specific borrowings
--> weighted average interest rate of other borrowings

Capitalization period
1. Capitalization begins when (1), (2), (3) occur
(1) Interest cost is incurred
(2) Construction activities are in progress
(3) Expenditures are incurred

2. Capitalization ends when (4) and (5) occur
(4) The asset is substantially complete
(5) The asset is ready for its intended use


International Financial Reporting Standards (IFRS)

   IAS 23: Borrowing Costs


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   Codification Topic 835
   Interest
 
Subtopics of Codification Topic 835
 
   835-10 Overall
   835-20 Capitalization of interest
   835-30 Imputation of interest
 
Accounting Terms of Codification Topic 835-10
 
 
Accounting Terms of Codification Topic 835-20
 
   Activities
   Capitalization rate
   Expenditures
   Intended use
   Interest cost
 
Accounting Terms of Codification Topic 835-30
 
   Discount
   Imputed interest rate
   Interest method
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   Other Topics at the Codification 800 
Accounting Standards Codification, ASC, Overview
 
ASC Codification Topic 805: Business Combinations
ASC Codification Topic 808: Collaborative Arrangements
 
ASC Codification Topic 810: Consolidation
ASC Codification Topic 815: Derivatives and Hedging
 
ASC Codification Topic 820: Fair Value Measurements and Disclosures
ASC Codification Topic 825: Financial Instruments
 
ASC Codification Topic 830: Foreign Currency Matters
ASC Codification Topic 835: Interest
 
ASC Codification Topic 840: Leases
ASC Codification Topic 845: Nonmonetary Transactions
 
ASC Codification Topic 850: Related Party Disclosures
ASC Codification Topic 852: Reorganizations
ASC Codification Topic 855: Subsequent Events
 
ASC Codification Topic 860: Transfers and Servicing


   U.S. GAAP Codification of Accounting Standards
Accounting Standards Codification, ASC, Overview
ASC Codification 200: Presentation
ASC Codification 300: Assets
ASC Codification 400: Liabilities
ASC Codification 500: Equity
ASC Codification 600: Revenue
ASC Codification 700: Expenses
ASC Codification 800: Broad Transactions
ASC Codification 900: Industry

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