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LSDefine

Simple English definitions for legal terms

capitalized interest

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A quick definition of capitalized interest:

Capitalized interest is when a company doesn't immediately report the interest it owes on a loan or asset as an expense. Instead, the interest is added to the total value of the asset on the company's balance sheet. Later, the interest is reported as a depreciation of the asset on the company's income statement. This helps the company reduce its taxes after depreciation. Capitalized interest is only used for long-term assets, like building a headquarters. It's important to note that capitalized interest is different from capitalized accrued interest, which refers to all the interest a company owes on a loan currently.

A more thorough explanation:

Definition: Capitalized interest refers to the interest that is accrued on a long-term asset or loan, but is not immediately reported as an expense on a company's income statement. Instead, the interest is added to the total value of the asset on the balance sheet and is later reflected as a depreciation of the asset on the income statement.

For example, if a company is constructing a new building, they may take out a loan to finance the project. As the construction progresses, interest will accrue on the loan. Instead of immediately reporting this interest as an expense, the company can choose to capitalize it by adding it to the total value of the building on their balance sheet. This can help to reduce taxes after depreciation.

It's important to note that capitalized interest can only be used for long-term assets, such as real estate or equipment, and not for short-term assets like inventory or supplies.

Example: ABC Corporation is constructing a new office building that will cost $10 million. They take out a loan for $8 million to finance the project. As construction progresses, the company accrues $100,000 in interest on the loan. Instead of immediately reporting this interest as an expense, they choose to capitalize it by adding it to the total value of the building on their balance sheet. The building is now valued at $10.1 million ($10 million + $100,000 in capitalized interest). Later, when the building is complete and in use, the company will report the accrued interest as a depreciation expense on their income statement.

This example illustrates how capitalized interest can be used to reduce taxes after depreciation. By adding the interest to the total value of the building, the company can increase the amount of depreciation they can claim on their taxes, which can help to lower their tax bill.

capitalized expenditure | capitalized value

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MIAMI A
[] AromaticTroubledDormouse
20:55
How does one know if they are UR1 or UR2?
[] AromaticTroubledDormouse
20:56
CONGRATS MACAQUE!
TY
got a random stanford email and almost had a heart attack
ALSO CONGRATS!
Congrats1!
21:15
Miami A, yall I'm so excited I could cry.
21:15
Feel like I can finally stop holding my breath!! Whew!!!
[] baddestbunny
22:16
every time I get accosted by a strange man who follows me around because my male coworkers were too busy talking to walk me back to my car I get closer to saying we need to bring back traditional gender roles
Dkk
22:32
Nice! @Macaque
Dkk
22:32
@Aromatic, Have to guess.
Dkk
22:33
That sucks @Bunny do you have to go to the hospital?
[] baddestbunny
22:40
I said accosted not assaulted
23:35
guys. my notre dame address just went long is this good or bad
1a2b3c4d26z
23:37
Oooooo me too
23:37
omg is this good or bad
Dkk
23:47
Idk if gender roles are gunna fix that then.
23:49
it looks like most people who applied in october last cycle didn't get a decision until january... does it even mean anything that our addresses went long??
hows ED 2 compared to ED 1?
Dkk
0:10
No idea
windyMagician
0:34
reporting live to say my ndls address also went long
does it mean anything ^
Dkk
2:21
NDLS and Fordham took a very long time last year. It's good info for people to know.
[] baddestbunny
4:29
let’s get after it boys and girls
Dkk
5:21
I gtg to bed soon.
Dkk
5:22
Big day today. Gunna be a crazy one. I will sleep through the first half.
good morning lsd it is 5 am EST
also jazzy my ndls address went long ages ago i sadly do not think it means anything
my stanford address also went long LOL i think at most it's an indicator it's under review
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