Capitalization/Expense of Interest Costs / Effects on EBIT

CFA Level II
#1

Hello,

I am not sure of having got it right.

When we adjust a capitalized interest (so we expense) I make two adjustments on the Income Statement:

  1. Deduct depreciation relative to the capitalized interest

  2. Add interest expense.

So, if this adjustments are accurate, I would expect to end up with an higher EBIT when expensing interest costs rather than when capitalize.

Do you agree?

Thanks a lot

#2

Agree.