United States

Interest cost incurred before the end of a construction period

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 Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, which requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. Statement No. 89 also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles.

Statement No. 89 is effective for reporting periods beginning after December 15, 2019, and earlier application is encouraged. The requirements should be applied prospectively.