CFA Practice Question

CFA Practice Question

SFAS 34 (Interest Capitalization)
A. requires the capitalization of interest costs incurred on that borrowing during the construction period.
B. requires the expensing of research costs but capitalization development costs when specific criteria are met.
C. makes expensing all borrowing costs the benchmark treatment.
Explanation: When a specific borrowing is associated with the construction, the interest cost incurred on that borrowing is capitalized.

User Contributed Comments 6

User Comment
KD101 Are we supposed to remember the numbers too (SFAS and what they say?) We are not supposed to be CPAs
gweiden I don't think you have to know the numbers, but you do have to know the proper treatment of the items in question. Here you are given that SFAS 34 refers to interest capitalization, therefore, you have to know the proper treatment of interest capitalization.
charliedba SFAS 34 introduces as many controversies into the accounting for the interest on self-constructed assets as it settles.
asfar In some situations you might not capiyalize the interest if it isn't related directly to the construction.
Kashi2010 SFAS is US GAAP - B would only be permitted under IAS, International Standards.
jpducros Good point Kashi2010
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