Assets That Qualify For Interest Capitalization
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The purpose of this assignment is to complete the FASB Codification Assignment. Complete Items 1-4.
Item 1
Access the glossary (Master Glossary) to answer the following
What is a change in accounting estimate?
How is a change in accounting principle distinguished from a “change in accounting estimate affected by a change in accounting principle?”
Item 2
What guidance does the codification provide concerning the format of accounting disclosures?
Item 3
In light of the full disclosure principle, investors and creditors need to know the balances for assets, liabilities, and equity as well as the accounting policies adopted by management to measure the items reported in the balance sheet.
Instructions: Go to http://aaahq.org/asclogin.cfm to log in and prepare responses to the following. Provide codification references for your responses. username: aaa54452 password yzN3Z4F
Identify the literature that addresses the disclosure of accounting policies.
How are accounting policies defined in the literature?
What are the three scenarios that would result in detailed disclosure of the accounting methods used?
Item 4
Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included in the cost of the warehouse because it is a financing expense. Others on the planning team believe that some interest cost can be included in the cost of the warehouse, but no one could identify the specific authoritative guidance for this issue. Your supervisor asks you to research this issue.
Instructions: Go to http://aaahq.org/asclogin.cfm to log in and prepare responses to the following. Provide codification references for your responses.
Is it permissible to capitalize interest into the cost of assets? Provide authoritative support for your answer.
Discuss which assets qualify for interest capitalization.
Is there a limit to the amount of interest that may be capitalized in a period?
If interest capitalization is allowed, what disclosures are required?
General Requirements
APA style is not required, but solid academic writing?is expected.
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