Capitalizing Interest on Debt

USA Discussion in 'Businesses / Corporations' started by mc0624, May 26, 2018.

  1. mc0624


    Jan 14, 2016
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    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?

    mc0624, May 26, 2018
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  2. mc0624

    kirby VIP Member

    May 12, 2011
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    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.
    Last edited: May 29, 2018
    kirby, May 29, 2018
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