This is the amount of interest incurred that could have been avoided if the asset had not been built. Steps in computing interest capitalization 1. The weighing is done by time. Weighted average capital expenditures are used in figuring avoidable interest. If average accumulated expenditures are greater than the amount of specific borrowings, use a weighted average interest rate incurred on other outstanding debt during the period to figure avoidable interest on the amounts greater than the specific borrowings.
Debt issued during the year is weighted by the fraction of the year outstanding.
Compute actual interest. This figure represents capitalized interest. The project was completed on June 30, Year 2. APB Opinion 29 - Nonmonetary Exchanges 1. However, as explained below, there are several exceptions to the basic rule.