How is interest capitalised?
submitted by J.Kakora

Meringue

By adding it to the cost basis of a qualifying asset during its construction. You don't expense the interest immediately, you include it as part of the asset's value on the balance sheet, which then depreciates over time.

Kev

When a company is building something like a new factory, the interest on loans taken out for that project can be added to the asset's cost. You don't need to record it as an expense. This means the interest gets "capitalized" and is spread out over the useful life of the asset. The expense will come in through depreciation, which will happen later.