GASB Issues Guidance on Accounting for Interest Cost Incurred Before the End of a Construction Period

GASB Releases Standard on Accounting for Construction Period Interest Costs

The Governmental Accounting Standards Board (GASB) has issued a new standard, Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. Statement 89 provides accounting requirements for interest cost incurred before the end of a construction period.

Statement 89 establishes guidance designed to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period. It also simplifies accounting for interest cost incurred before the end of a construction period.

Interest Costs Before the End of a Construction Period

For financial statements prepared using the economic resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expense in the period in which the cost is incurred. Such interest cost should not be capitalized as part of the historical cost of a capital asset.

For financial statements prepared using the current financial resources measurement focus, interest incurred before the end of a construction period should continue to be recognized as an expenditure on a basis consistent with governmental fund accounting principles.

Effective Date

The guidance in Statement 89 is effective for reporting periods beginning after December 15, 2019, with earlier application encouraged.

 

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