Inscrivez-vous ou connectez-vous pour rejoindre votre communauté professionnelle.
Finance
When it's higher than you IRR I guess.
You should include interest expense in the cost of acquiring an asset during the period when an entity is carrying out those activities needed to bring the asset to its designated condition and location. The amount of interest capitalized should be the amount incurred during the period because of expenditures for the asset.
It is not always necessary to capitalize interest cost. The most optimum situation for doing so is when an asset requires substantial expenditures and a substantial period to construct, thereby accumulating a significant amount of interest cost. However, if there is a significant additional accounting and administrative cost associated with capitalizing interest cost, and the benefit of the additional information is minimal, you do not have to capitalize it.
You should capitalize the associated interest cost for the following assets:
You should not capitalize the associated interest cost for the following assets:
You can only capitalize the interest cost associated with land if it is undergoing those activities necessary to prepare it for its intended use. If so, the expenditure to acquire the land qualifies for interest capitalization.
If an entity constructs a building on a newly-acquired land parcel, then the interest cost associated with the building should be capitalized as part of the building asset, rather than the land asset.
Interest costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset and, therefore, should be capitalised.
This is the recognition principle as laid down by IAS23.
The interest cost/borrowing cost can be capitalized if the said funds are borrowed for purchasing assets which take a substantial amount of time to set up. the in terest accrued during the time the asset is being set up can be capitalized.
When building or purchasing long term assets via banking loans