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Capitalisation of borrowing costs

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UK GAAP

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Abstract

A point of contention in determining the initial measurement of a tangible fixed asset is whether borrowing costs incurred during the period of construction of an asset should or should not be capitalised. This issue was referred to in company law for the first time in 1981, with the Companies Act 1981 permitting the inclusion of interest in the production cost of an asset.1

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References

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  2. ASB Discussion Paper, Measurement of tangible fixed assets, October 1996.

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  3. The moratorium was imposed on November 14, 1974 by Accounting Series Release No. 163, Capitalisation of Interest by Companies Other Than Public Utilities. Washington D.C.: Securities and Exchange Commission, 1974.

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  4. ‘Public utilities’ was defined to include electric, gas, water, and telephone utilities.

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  9. For a full understanding of the reasons for the dissenting vote, see SFAS 34 for the text of the statement issued by the dissenting members of the FASB.

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  16. Ibid., para. 54.

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  28. SFAS 58, Capitalisation of Interest Cost in Financial Statements That Include Investments Accounted for by the Equity Method, FASB, April 1982.

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  29. SFAS 62, Capitalisation of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings and Certain Gifts and Grants, FASB, June 1982.

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Authors
  1. Mike Davies
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  2. Ron Paterson
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  3. Allister Wilson
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© 1997 Ernst & Young

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Davies, M., Paterson, R., Wilson, A. (1997). Capitalisation of borrowing costs. In: UK GAAP. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-13819-7_13

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