The capitalized interest cost

CFA Level I
#1

Hi everyone

now if we capitalized interest cost, then we will reflect this payment which is a cash transaction in the depreciation noncash transaction, so how we will treat this issue when we trying to calculate CFO in a indirect method?

Thank you

#2

Capitalized interests are shown in the cash-flow statement under investing cash flow. Since you add back the depreciated annual value in the indirect cash flow calculation you eliminate the depreciation costs in the P&L. What then flows effectively through the cash-flow statement is 100% of the interests paid and capitalized. Regards, Oscar

#3

But as mentioned in the curriculum we only report the capitalized internet in CFI in the period prior to the completion of the construction, the periods after the construction is completed the capitalized interest reflected in the depreciation.

#4

In the P&L the interest expense is recognized over time, whereas there is no difference in the cash flow statement vs. recognizing the interest fully in the P&L in the year occurred.