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I had encountered a situation in my AAA paper regarding an accounting treatment.
A company has availed a loan of $24m to build a manufacturing facility (the qualifying asset). Out of this $8m was used to buy construction equipment that will be used to build the facility.
The construction equipment can be used in the future to build more facilities. But the company does not intend to build further facilities.
The company has capitalised the entire interest expense of the $24m loan (including the interest expense of $8m).
Is this correct?
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