Writing assignment 2, spring 2011

Writing assignment 2, spring 2011 - There are two main...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
There are two main objectives for capitalizing interest in the cost of assets. First, is to obtain a purchase cost that will most closely reflect a company’s total investment in the asset. This measurement must include any legal fees, construction, etc. associated with the acquirement of the asset. Second, is to apply a cost that relates to the ownership of a resource that will “benefit future periods against the revenues of the periods benefited.” (835-20-10-1) That is, to match the cost of the item in the period that is benefited. In theory, one is able to capitalize any asset that requires a period of time to get that asset prepared for its intended use. In most cases, however, the benefit of capitalizing does not always rationalize the cost involved in supplying that information. Interest is capitalized most commonly for 1) assets produced for the company’s own use, 2) assets intended for sale are lease, and 3) investments accounted for by the equity method. Interest that is not capitalized include 1) assets already in use for their intended activities, 2) assets not in use for their intended activities, 3) assets not included in the consolidated balance sheet, 4) investments accounted for by the equity method after the planned principal operations of the investee begin, 5) investments capitalizing
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Writing assignment 2, spring 2011 - There are two main...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online