AICPA Panels Submit Comments to GASB on Capitalization of Interest Costs During the Construction Period

April 26, 2018

The AICPA Private Companies Practice Section Technical Issues Committee (TIC) recently submitted comments to the Governmental Accounting Standards Board (GASB) on GASB’s Exposure Draft (ED), Accounting for Interest Costs during the Period of Construction. The primary objective of the ED is to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and simplifying accounting for interest cost incurred during the period of construction.

In their letter dated February 16, 2018, TIC noted that the proposed accounting treatment will simplify the accounting for interest cost during the construction period. TIC is aware that this proposed accounting treatment could result in differences in how governmental entities report these costs as compared to privately run entities (such as hospitals), but this issue arises in other areas of GAAP so TIC does not foresee an issue with those differences.

TIC has discussed this proposal with their clients, and none of them foresee any changes to debt covenants or other significant impact of the ED and, therefore, TIC believes an effective date of periods beginning on or after December 15, 2018 would be appropriate.