Capitalizing Interest

As churches outgrow their facilities and either expand their current facility or build on a new site, many are faced with “how to” finance their growth. Growth will either be financed internally, (no external debt) or externally (debt with a third party). Many churches may be blessed to save thousands or dollars over time and have money invested for the long-term. However, some churches are faced with no space and need external funds to finance immediate construction. If construction is financed with debt, (e.g, a note from a bank), the interest that is incurred is considered a component cost of the construction. Or simply, the cost of the building includes more than just labor, materials and overhead. Interest cost shall be capitalized as part of the historical cost of acquiring certain assets. To qualify for interest capitalization, assets must require a period of time to get them ready for their intended use. (FAS34).

How is interest calculated and recorded… Read the next article