The criteria for capitalization of fixed assets:
One decisive factor associated with the capitalization of fixed assets is that the purchase of the asset benefits more than one period. Other criterion includes expenses being incurred (including interest) for the cost of the asset and having that asset ready for its intended use prior to its completion.
Items included in the cost of a fixed asset:
Items that are included in the cost of a fixed asset include all expenditures associated with the acquisition of the asset, such as property clearing costs, delivery costs (trucking), upgrades (modifications) to the asset, and interest.
Should interest be included in the cost of a fixed asset?
Yes, interest should be included in the cost of a fixed asset. GAAP requires the capitalization of interest when the asset is being constructed, prepared, or in a phase that is not generating revenue. Interest is deferred by adding it to the cost of the asset.
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