United States

Proposed accounting for interest cost during construction

FINANCIAL REPORTING INSIGHTS  | 

Currently, in financial statements prepared using the economic resources measurement focus, interest cost incurred during a period of construction is included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. The Governmental Accounting Standards Board recently issued an Exposure Draft, Accounting for Interest Cost During the Period of Construction. If finalized, this Exposure Draft would require interest cost incurred during the period of construction to be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. The Exposure Draft also would reiterate that in financial statements prepared using the current financial resources measurement focus, interest cost incurred during the period of construction should be recognized as an expenditure on a basis consistent with governmental fund accounting principles.

If finalized, the Exposure Draft would be effective for reporting periods beginning after December 15, 2018, and the requirements would be applied prospectively. The Exposure Draft is available for comment until March 8, 2018.