COMM-3016EL Chapter Notes - Chapter 10AB: Book Value, Capitalization Rate
27 Mar 2018
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Borrowing costs are made up of interest and related costs that a company incurs related to the borrowing of funds. The cost of equity financing is specifically excluded. Qualifying assets must require substantial time to get ready for their intended use or sale. This may include inventories, items of pp&e, investment properties, or intangible assets. Borrowing costs for qualifying assets measured at fair value and inventories that are produced in large quantities on a repetitive basis may be capitalized, but it is not required. Capitalization period time over which interest must be capitalized; begins on the commencement date, and ends when substantially all the activities needed to prepare the asset for its intended use or sale are complete. If a project is finished in stages so that the parts completed can be used while activities continue on the remainder, capitalization stops on the parts that are substantially complete.
