ayaz_mahmud369

You are allowed to cap. Interest on the balance sheet for an asset you are constructing (soft, real estate etc.) . Up to this point "relative to expensing" EBIT is higher

Once asset is complete, you need to depreciate/amortize on the income statement, which lower EBIT as the post capitalization expense is not recorded as interest expense (but as amortization of thr asset)

- Guille

maryli

In the period you capitalize, the P&L is not impacted.

You only Amortiza once the asset is ready

- Guille

jarobi04

good question. EBIT does not include interest expense,and so capitalizing it should instead increase NI in that period since no amortization has been passed to IS yet.

can someone explain why EBIT increas?

RMontgomery

Wouldn't it decrease your EBIT? My thought process is, when you capitalize interest, you have to depreciate it along with the asset, leading to higher depreciation expense each period. This would lower your EBIT