capitalization of interest

Broad Transactions3

1. 835-10Overall835 Interest

   ASC 835-10 is the Overall subtopic of the Interest Topic; it does little more than map the Topic's structure and point readers elsewhere. It explains that Topic 835 addresses interest recognition in two instances — capitalization of interest costs incurred in connection with an investment in an asset (Subtopic 835-20) and imputation of interest where required (Subtopic 835-30) — and acknowledges that interest income/expense for specific transactions and instrument types is governed by other Topics.

2. 835-912Contractors—Federal Government835 Interest

   This Subtopic tells federal government contractors when interest cost may (and may not) be capitalized. Because assets built under contracts where revenue is recognized over time are "employed in the earnings activities" of the contractor (and often involve routinely produced inventories), interest capitalization is prohibited for those long-term contracts. Only when revenue is recognized at a point in time and fulfillment costs are capitalized as an asset under Subtopic 340-40 can those costs be qualifying assets for interest capitalization, and then the investment is limited to uncollected receivables net of related non-interest-bearing liabilities.

3. 835-926Entertainment—Films835 Interest

   This short subtopic tells film producers and distributors how to handle interest costs incurred while a film is being produced. The rule is simple: interest costs related to film production are accounted for under the general interest-capitalization guidance in Subtopic 835-20 (835-926-25-1). Its scope follows the Entertainment—Films overall scope in Section 926-10-15.