USA Capitalizing Interest on Debt

[mc0624]

Quite a few note payables were converted to equity which resulted in a large amount of interest being incurred. Client is wanting to capitalized the interest (around $500k). This is a huge hit to the P&L if it is not capitalized. It was not booked over the 2-3 years of the loan at the recommendation of several investor CPA's.

In my reading, capitalizing the interest seem okay when the loan was for the purchase of major assets. In this situation, the funds were used for some assets but also to keep the startup going.

Can the interest actually be capitalized in this situation?

Thanks

 

[kirby]

Interest capitalization on self-constructed assets is accepted GAAP.
I've never seen a capitalization of interest for Operating expense or just to finance a large purchase.