# ASC 835-20-15: Interest — Capitalization of Interest — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/835/20/#15-scope-and-scope-exceptions) 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): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:b2692b64aa44ae5c98c1679db9ac4a8f8e4510ffcfe6cabfce65ab3f8fab4868 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/835/20/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [835-20-15-1](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:5ccca4c5dc22cebb768bd9c5d5997d1c8dfffaf75ad8cba92c4e0e267483c123 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Other Considerations ##### [835-20-15-2](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:4f82c8800bf048301eaf9c0790a6586cbbef282655445c270ec7a2b55f584af3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In concept, [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.") is capitalizable for all assets that require a period of time to get them ready for their [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.") (an acquisition period). However, in many cases, the benefit in terms of information about the entity's resources and earnings may not justify the additional accounting and administrative cost involved in providing the information. The significance of the effect of interest capitalization in relation to the entity's resources and earnings is the most important consideration in assessing its benefit. The ease with which qualifying assets and related [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).") can be separately identified and the number of assets subject to interest capitalization are important factors in assessing the cost of implementation. ##### [835-20-15-3](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:334b8120ab88ab8b74a6d50f860a0f32ad31373d5809ead524b8b187b6b1c0ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest capitalization is required only when the balance of the informational benefit and the cost of implementation is favorable. A favorable balance is most likely to be achieved where an asset is constructed or produced as a discrete project for which costs are separately accumulated and where construction of the asset takes considerable time, entails substantial expenditures, and is likely to involve a significant amount of interest cost. A favorable balance is unlikely in the case of inventory items that are routinely manufactured or otherwise produced in large quantities on a repetitive basis. Accordingly, this Subtopic proscribes interest capitalization on those types of inventories (that is, inventory items that are routinely manufactured or produced in large quantities on a repetitive basis) and provides for interest capitalization on assets that are constructed or produced as discrete projects. ##### [835-20-15-4](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:eecfe918687c8a6dc7c0afec3ac4198fbb9dc44382b0dba446a62f2f8259f491 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Minimum threshold levels are common in inventory and property, plant, and equipment accounting. Many entities do not include the costs of minor items in inventory, and many entities do not capitalize individual items of property, plant, and equipment, the costs of which are less than a specified threshold. Such thresholds are designed to minimize the burden of capitalizing large numbers of assets and accounting for those costs as the assets are used. Those thresholds are justified on the grounds that the assets whose costs are charged to expense as purchased are immaterial both individually and in the aggregate. This Subtopic does not affect the use of threshold levels established in conformity with such materiality tests. ##### [835-20-15-5](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:7b55471d7afab5260dc423da185ea726f3251ebb7a5342e161c3707a179609a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest shall be capitalized for the following types of assets (qualifying assets): 1. a Assets that are constructed or otherwise produced for an entity's own use, including assets constructed or produced for the entity by others for which deposits or progress payments have been made. 2. b Assets intended for sale or lease that are constructed or otherwise produced as discrete projects (for example, ships or real estate developments). 3. c Investments (equity, loans, and advances) accounted for by the equity method while the investee has [activities](https://asc.understandingaccounting.org/glossary/a/#activities "The term activities is to be construed broadly. It encompasses physical construction of the asset. In addition, it includes all the steps required to prepare the asset for its intended use. For example, it includes administrative and technical activities during the preconstruction stage, such as the development of plans or the process of obtaining permits from governmental authorities. It also includes activities undertaken after construction has begun in order to overcome unforeseen obstacles, such as technical problems, labor disputes, or litigation.") in progress necessary to commence its planned principal operations provided that the investee's activities include the use of funds to acquire qualifying assets for its operations. The investor's investment in the investee, not the individual assets or projects of the investee, is the qualifying asset for purposes of interest capitalization. ##### [835-20-15-6](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:aa9111adb5524eeba9896554db142a5f52d2e2fcfdaacee9daac3f027781cabc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest shall not be capitalized for the following types of assets: 1. a Assets that are in use or ready for their intended use in the earning activities of the entity 2. b Assets that are not being used in the earning activities of the entity and that are not undergoing the activities necessary to get them ready for use 3. c Assets that are not included in the consolidated balance sheet of the parent entity and consolidated subsidiaries 4. d Investments accounted for by the equity method after the planned principal operations of the investee begin (see paragraph [835-20-55-2](https://asc.understandingaccounting.org/asc/835/20/#835-20-55-2) for clarification of the phrase _after planned principal operations begin_) 5. e Investments in regulated investees that are capitalizing both the cost of debt and equity capital (see paragraph [835-20-55-3](https://asc.understandingaccounting.org/asc/835/20/#835-20-55-3) for guidance on capitalization of costs by a regulated investee) 6. f Assets acquired with gifts and grants that are restricted by the donor or grantor to acquisition of those assets to the extent that funds are available from such gifts and grants. Interest earned from temporary investment of those funds that is similarly restricted shall be considered an addition to the gift or grant for this purpose. 7. g Inventories that are routinely manufactured or otherwise produced in large quantities on a repetitive basis. ##### [835-20-15-7](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:5d5974a8b92521781c1e1faf69a1d5376016ce123c355f2804a4afa6b835cb05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accretion expense related to exit costs and asset retirement obligations shall not be considered to be interest cost for purposes of applying this Subtopic. See Topic 420 or Subtopic 410-20 for guidance on those areas. The interest cost component of net periodic pension cost shall not be considered to be interest for purposes of applying this Subtopic. See Subtopic 715-30 for guidance. ##### [835-20-15-8](https://asc.understandingaccounting.org/asc/835/20/#835-20-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:03.693Z to 2026-09-10T01:49:03.693Z Record version: sha256:47a37953a9fe1e09995451e9f2c61a4d395cb8e8caff591a94549881fc15f5b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Land that is not undergoing activities necessary to get it ready for its intended use is not a qualifying asset. If activities are undertaken for the purpose of developing land for a particular use, the expenditures to acquire the land qualify for interest capitalization while those activities are in progress. The interest cost capitalized on those expenditures is a cost of acquiring the asset that results from those activities. If the resulting asset is a structure, such as a plant or a shopping center, interest capitalized on the land expenditures is part of the acquisition cost of the structure. If the resulting asset is developed land, such as land that is to be sold as developed lots, interest capitalized on the land expenditures is part of the acquisition cost of the developed land.