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issuance of bonds to finance the construction of a capital asset. The beginning date is triggered by the issuance of the bonds and when one of three conditions is present. The conditions include: (1) an expenditure has been made by a payment to the vendor from proceeds, or expenses have been incurred that will reimbursed from bond proceeds, or (2) there is a viable project underway supported by an approved program statement, or (3) an addition or an improvement is made to the project that is financed from funds other than bond proceeds when old debt remains outstanding. Interest will not be capitalized under (3) unless the project expenses are capitalized according to the capitalization policy threshold.

Both interest expense and offsetting investment income will be determined on an accrual basis, unless the cash basis doesn’t differ materially. Immaterial differences may arise if the interest payment date is close to June 30, or the investment income is received on or around June 30. Interest expense will be reduced by offsetting investment income to derive the interest amount to capitalize. Offsetting investment income is included from all bond accounts except the investment income earned by a sinking fund is excluded.

Capitalized interest will be allocated to applicable projects during construction if more than one project is financed by a single bond issue.

Interest expense capitalized by UNFC will be transferred to the campuses for capitalization along with construction costs.

Approved by the Council of Business Officers:  June 12, 1975 and Revised September 11, 1981, February 7, 1996, May 21, 2001, April 7, 2004, May 17, 2006, and June 1, 2007


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