Question
Topic: Interest Capitalization A&R Construction Company has been very successful over the past five years and now has decided that it needs to construct a
Topic: Interest Capitalization A&R Construction Company has been very successful over the past five years and now has decided that it needs to construct a building to house all of its equipment. The companys controller has notified management that any interest costs on funds obtained to construct the new building can be capitalized as part of the cost of the new building. However, the vice president of finance has raised the following question for the Controller: I understand your presentation that we can capitalize interest costs on the average amount of accumulated expenditures during the current year. But the building will not be completed until next year, and, therefore, do we capitalize only the interest costs on the average of current period expenditures? The controller responded that the capitalization should be on the total expenditures. The vice president questioned again whether the controller is correct since the expenditure made last year already included capitalized interest.
Question: Utilize the FASBs Codification to write a report on the proper accounting for interest capitalization. Provide specific Codification references.
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