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 |