{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/835/20/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"835","topic_title":"Interest","subtopic":"835-20","subtopic_title":"Capitalization of Interest","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"835-20-25-1","para":"25-1","html":"
This Section provides guidance on the capitalization period over which capitalizable interest costs are required to be recognized. See Section 835-20-30 for guidance on the amount of interest costs that is capitalizable as part of the initial investment in an asset.
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The capitalization period is determined by the definition of the circumstances in which interest is capitalizable. Essentially, the capitalization period covers the duration of the activities required to get the asset ready for its intended use, provided that expenditures for the asset have been made and interest cost is being incurred. Interest capitalization continues as long as those activities and the incurrence of interest cost continue.
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The capitalization period shall begin when the following three conditions are present:
  1. a
    Expenditures for the asset have been made.
  2. b
    Activities that are necessary to get the asset ready for its intended use are in progress.
  3. c
    Interest cost is being incurred.
Interest capitalization shall continue as long as those three conditions are present.
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If the entity suspends substantially all activities related to acquisition of the asset, interest capitalization shall cease until activities are resumed. However, brief interruptions in activities, interruptions that are externally imposed, and delays that are inherent in the asset acquisition process shall not require cessation of interest capitalization.
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The capitalization period shall end when the asset is substantially complete and ready for its intended use. Consider the capitalization period that is appropriate in each of the following examples:
  1. a
    Some assets are completed in parts, and each part is capable of being used independently while work is continuing on other parts. An example is a condominium. For such assets, interest capitalization shall stop on each part when it is substantially complete and ready for use.
  2. b
    Some assets must be completed in their entirety before any part of the asset can be used. An example is a facility designed to manufacture products by sequential processes. For such assets, interest capitalization shall continue until the entire asset is substantially complete and ready for use.
  3. c
    Some assets cannot be used effectively until a separate facility has been completed. Examples are the oil wells drilled in Alaska before completion of the pipeline. For such assets, interest capitalization shall continue until the separate facility is substantially complete and ready for use.
","snippet":"The capitalization period shall end when the asset is substantially complete and ready for its intended use. Consider the capitalization period that is appropriate in each of the following examples:\n(a) Some assets are c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a566011831152717b13aaa0d171797ac1574b65fefcb0a1cc95837fcdb23c3c3","downloaded_from":"2026-09-10T01:49:08.881Z","last_downloaded_at":"2026-09-10T01:49:08.881Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482910","source_sha256":"89453682171c77bd7f84de629a12c7ca2ea094fbd89d85dc8235612c8947e166"}},{"citation":"835-20-25-6","para":"25-6","html":"
With respect to the requirement that the capitalization period ends when the asset is substantially complete and ready for its intended use, the words substantially complete prohibit continuation of interest capitalization in situations in which completion of the asset is intentionally delayed. For example, it is customary for a condominium developer to defer installation of certain fixtures and fittings until units are sold, so that buyers may choose the types and colors they want. An intentional delay of that kind is related more to marketing of the asset than to the exigencies of the asset acquisition process. Similarly, interest is not to be capitalized during periods when the entity intentionally defers or suspends activities related to the asset. Interest cost incurred during such periods is a holding cost, not an acquisition cost. However, delays that are inherent in the asset acquisition process and interruptions in activities that are imposed by external forces are unavoidable in acquiring the asset and as such do not call for a cessation of interest capitalization.
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Interest capitalization shall not cease when present accounting principles require recognition of a lower value for the asset than acquisition cost. The provision required to reduce acquisition cost to such lower value shall be increased appropriately. See Subtopic 360-10 for guidance on recognizing impairment of long-lived assets held for use.
","snippet":"Interest capitalization shall not cease when present accounting principles require recognition of a lower value for the asset than acquisition cost. The provision required to reduce acquisition cost to such lower value s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:03c777fa271935b4067ec11cadec65366e170bac83674e44186c10332e2e3497","downloaded_from":"2026-09-10T01:49:08.881Z","last_downloaded_at":"2026-09-10T01:49:08.881Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482910","source_sha256":"89453682171c77bd7f84de629a12c7ca2ea094fbd89d85dc8235612c8947e166"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1cc22a4c40711ad75c32671c491c7c636c116e50581c08e0115beacd9a8f527c","downloaded_from":"2026-09-10T01:49:08.881Z","last_downloaded_at":"2026-09-10T01:49:08.881Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482910","source_sha256":"89453682171c77bd7f84de629a12c7ca2ea094fbd89d85dc8235612c8947e166"}},{"block":null,"heading":"The Capitalization Period for Assets Financed with Tax-Exempt Borrowings","paragraphs":[{"citation":"835-20-25-8","para":"25-8","html":"
In situations involving qualifying assets financed with the proceeds of tax-exempt borrowings that are externally restricted as specified in this Subtopic, the capitalization period begins at the date of the borrowing.
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