Discuss similarities and differences in your approaches to this issue Peer: Unfortunately, 2016 books are closed. I
Question:
Discuss similarities and differences in your approaches to this issue Peer:
Unfortunately, 2016 books are closed. I am not sure how familiar you may be with GAAP rules but what you are asking is fraudulent. We would not be able to capitalize interest since 2016 nor make up for 2015 as the construction started this year (2017). Also, even if I wanted to, I could not as it is extremely unethical and it would make our books unreliable. In addition, I will not be adding higher overhead costs than what we had for the year. I am not putting my morals and integrity as an accountant on the line for appearances.
According to the Intermediate Accounting textbook, chapter 10 specifically states that, "The capitalization period begins when expenditures for the assets have begun". Due to this rule, we would not be able to capitalize interest on 2016, as construction begun in 2017.
Also, the chapter states that the "Capitalization period begins when activities that are necessary to get that asset ready for its intended use are in progress". Since there were subsequent letters to and from the architect in 2015 to get the project started, maybe the company could have started capitalizing interest then. Since it is 2016's book, unfortunately we would not be able to "double dose" interest now as this should had been done back in 2015.
In the financial aspect, what you are asking me sir cannot be done. Ethically, it is incorrect for you to ask me to alter the books and boost profit for the year. I would not be adding extra time for myself nor adding overhead cost.
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher