# ASC 835-20-35: Interest — Capitalization of Interest — 35 Subsequent Measurement

Source: FASB Accounting Standards Codification, Basic View

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## ASC 835-20-35: 35 Subsequent Measurement

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##### [835-20-35-1](https://asc.understandingaccounting.org/asc/835/20/#835-20-35-1)

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This Section addresses the accounting for capitalized interest subsequent to the initial measurement of the related asset.

#### Amortization of Capitalized Interest on an Equity Method Investment

##### [835-20-35-2](https://asc.understandingaccounting.org/asc/835/20/#835-20-35-2)

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This Subtopic requires capitalization 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.") on an investment accounted for by the equity method that has not begun its planned principal operations 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. Under those circumstances, capitalized interest cost may be associated with the estimated useful lives of the investee's assets and amortized over the same period as those assets. Interest capitalized on the investments accounted for by the equity method is amortized consistent with paragraph [323-10-35-13](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-13).

#### Compounding of Interest

##### [835-20-35-3](https://asc.understandingaccounting.org/asc/835/20/#835-20-35-3)

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This paragraph addresses whether capitalized interest should be compounded. The compounding of capitalized interest is conceptually consistent with the conclusion that interest on [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 is a cost of acquiring the asset. While some portion of the interest incurred during an accounting period may be unpaid at the end of the period, that complication usually may be ignored to simplify practical application.