Clarification and recommendations regarding whether interest cost on construction of a new warehouse may be included in the cost of the new warehouse. When an enterprise borrows funds specifically for the purpose of obtaining a particular qualifying asset, the borrowing costs that directly relate to that qualifying asset can be capitalized. The interest costs that are directly attributable to the construction of warehouse can be capitalized. Further, interest costs can be capitalized as part of the warehouse cost when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably. Other borrowing costs are recognized as an expense in the period in which they are incurred. The capitalization of interest cost as part of the cost of the warehouse should commence when all the following conditions are satisfied: Expenditure for the construction of warehouse is being incurred. Interest costs are being incurred. Activities that are necessary to prepare the warehouse for its intended use is in progress or completed. Further, interest cost during the extended period in which active construction of warehouse was interrupted should not be capitalized. Also, in determining the amount of interest costs eligible for capitalization during a period, any income earned on the temporary investment of those borrowings should be deducted from the interest costs incurred.

Respond within 50-80 words a substantive initial response to the statement above.