# ASC 835-20-25: Interest — Capitalization of Interest — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/835/20/#25-recognition) 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): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:9d733d7d3978a02f0d3c4cef331612259951c283a8b61865d14e0b9a382300f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/835/20/#25-recognition) SEC content: no ##### [835-20-25-1](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:a108851a46a575ba80977f9ed1c291fb0247fc2339a26d43055e62ccd8c37dad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. #### The Capitalization Period ##### [835-20-25-2](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:2eb275f7057b75d9179ac03dc455329bae0f701b60a8029946d4e4ba28a3f1b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](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.") required to get the asset ready 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."), provided that [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 the asset have been made and [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 being incurred. Interest capitalization continues as long as those activities and the incurrence of interest cost continue. ##### [835-20-25-3](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:4d5d5ea45ec07620390a7b4ccb337add149b20e366373abd58397d06af60be50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [835-20-25-4](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:12f2f20aff15ab03b4226982851e0f267feafa1a63e06e06d60bc0bce20c2875 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [835-20-25-5](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:a566011831152717b13aaa0d171797ac1574b65fefcb0a1cc95837fcdb23c3c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [835-20-25-6](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:cb7b0aa59b77b6febbd7ce00d82c9bc88f415cc23f3063ab433f00587f4767a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [835-20-25-7](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:03c777fa271935b4067ec11cadec65366e170bac83674e44186c10332e2e3497 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. #### The Capitalization Period for Assets Financed with Tax-Exempt Borrowings ##### [835-20-25-8](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:08.881Z to 2026-09-10T01:49:08.881Z Record version: sha256:65084364719b9159b1716788a4902c72865dd533b008c5010046d57908addbeb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.