# ASC 835-20-10: Interest — Capitalization of Interest — 10 Objectives

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/835/20/#10-objectives)

Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.

Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure.

Source downloaded (UTC): 2026-09-10T01:49:00.682Z to 2026-09-10T01:49:00.682Z

Record version: sha256:a611831c1e56947537e73c30366af4fe0ee0e55b9c1004a2fccc281c942cec3e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 835-20-10: 10 Objectives

[Read section](https://asc.understandingaccounting.org/asc/835/20/#10-objectives)

SEC content: no

##### [835-20-10-1](https://asc.understandingaccounting.org/asc/835/20/#835-20-10-1)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:49:00.682Z to 2026-09-10T01:49:00.682Z

Record version: sha256:980fffb907b1643fc7bdc4f1b890e9136c17b260faff05b9105d6f7d96699b72

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The objectives of capitalizing interest are to obtain a measure of acquisition cost that more closely reflects an entity's total investment in the asset and to charge a cost that relates to the acquisition of a resource that will benefit future periods against the revenues of the periods benefited.

##### [835-20-10-2](https://asc.understandingaccounting.org/asc/835/20/#835-20-10-2)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:49:00.682Z to 2026-09-10T01:49:00.682Z

Record version: sha256:ed98424f1f4c3d5a587c5b87704682fab7f9ddc560c647e368614b59341a5dd6

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


On the premise that the historical cost of acquiring an asset should include all costs necessarily incurred to bring it to the condition and location necessary for its [intended use](https://asc.understandingaccounting.org/glossary/i/#intended-use "Intended use of an asset embraces both readiness for use and readiness for sale, depending on the purpose of acquisition."), in principle, the cost incurred in financing [expenditures](https://asc.understandingaccounting.org/glossary/e/#expenditures "Expenditures to which capitalization rates are to be applied are capitalized expenditures (net of progress payment collections) for the qualifying asset that have required the payment of cash, the transfer of other assets, or the incurring of a liability on which interest is recognized (in contrast to liabilities, such as trade payables, accruals, and retainages on which interest is not recognized).") for an asset during a required construction or development period is itself a part of the asset's historical acquisition cost. The cause-and-effect relationship between acquiring an asset and the incurrence of [interest cost](https://asc.understandingaccounting.org/glossary/i/#interest-cost "Interest cost includes interest recognized on obligations having explicit interest rates, interest imputed on certain types of payables in accordance with Subtopic 835-30, and interest related to a finance lease determined in accordance with Topic 842. With respect to obligations having explicit interest rates, interest cost includes amounts resulting from periodic amortization of discount or premium and issue costs on debt.") makes interest cost analogous to a direct cost that is readily and objectively assignable to the acquired asset. Failure to capitalize the interest cost associated with the acquisition of qualifying assets improperly reduces reported earnings during the period of acquisition and increases reported earnings in later periods.