I understand your desire to improve the company books to give the
shareholders a positive look at the past year. However, those
shareholders rely on us to provide a truthful and accurate
representation of their standings. As an accountant, I can uphold the
GAAP and follow the Code of Professional Conduct. What you are
asking for is unethical and destroys our company's integrity.
Since we did not start any work on the property until 2016, there are
no expenses to report in 2015. The GAAP is clear the overhead costs
must be tied directly to the construction of the asset; as such, my
salary does not fall under this category. It should also be noted that
while it may make the books look good this quarter, it will hurt the
company in the long run. The inflated overhead costs will not be
considered down the road when we need to record a fair value of the
asset, and this additional overhead with end up showing as a loss. It
would be better for the company to keep the figures correct so that
both present and future reports have an exact economic cost.
On capitalizing on the interest for the project, we do not meet the
three measures the GAAP uses to allow this allocation. First, the
project was not in development yet in 2015; thus, the only asset was
land that could not have interest capitalization added to it. Secondly,
we have to look at the period when the company is allowed to
capitalize on the interest. To count capitalization of interest, there
has to be activity or expenditures to have begun on the asset.
Thirdly, if you were allowed to capitalize the interest, you have to
determine the amount. To do this, we would have to determine how
much of the interest could have been avoided if the construction had
not occurred. Since there was no construction in progress in 2015,
there is no basis for determining the amount of interest.
I hope that you take all of this into consideration before proceeding.
If you wish to continue forward I will need to step down as the
account for this project.
Wahlen, J. M., Jones, J. P., & Pagach, D. (2016). Intermediate
Accounting: Reporting and Analysis, 2017 Update (2nd ed.). Cengage
Learning. https://ng.cengage.com/static/nb/ui/evo/index.html?
eISBN=9781337119146&snapshotId=372031&id=124839364&
