The GASB has issued Statement No. 89 titled Accounting for Interest Cost Incurred before the End of a Construction Period
. This statement is designed to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period. It also simplifies accounting for interest cost incurred before the end of a construction period.
The guidance in Statement No. 89 indicates that for financial statements prepared using the economic resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expense in the period in which the cost is incurred. Such interest cost should not be capitalized as part of the historical cost of a capital asset.
For financial statements prepared using the current financial resources measurement focus, interest incurred before the end of a construction period should continue to be recognized as an expenditure on a basis consistent with governmental fund accounting principles.
This statement is effective for financial statements for fiscal years beginning after December 15, 2019 with early application encouraged. The requirements should be applied prospectively.
The full text of GASB Statement No. 89 is available here.
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