Do you capitalize interest in your financial statements?
If yes, a new GASB statement will impact your financial statements. In June of 2018, GASB statement 89, Accounting for Interest Costs Incurred before the End of a Construction Period, was issued. The statement was issued to address some concerns with consistency in financial reporting and to simplify the accounting for interest costs incurred before the end of a construction period.
What’s the impact?
Well…. It’s simple. Just stop capitalizing interest going forward. Also, good news. No need to go back and correct what has been done in the past. Going forward (post implementation), interest costs incurred before the end of a construction period will be expensed as incurred.
The statement is effective for reporting periods beginning after December 15, 2019, although earlier implementation is encouraged. The statement is to be implemented prospectively, which again means no need to go back and undo what has been done in the past related to capitalized interest, only change going forward.
Should you have any questions or if you are considering implementing the standard early, feel free to reach out to your LSL CPAs team at (714) 672-0022!
