Utility enterprise funds that report to regulatory agencies may capitalize both actual interest paid on debt incurred for construction of plant assets and an imputed amount on their own funds so used.

Question

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Utilities that report to regulatory agencies are usually allowed to capitalize both the net cost for the period of construction of borrowed funds and a reasonable imputed rate on other funds so used. FASB standards also permit such capitalization by regulated entities, providing that imputed amounts capitalized are allowed to be recovered through rates charged to customers, and it is probable that all capitalized costs will be recovered through future revenues.

Utility Enterprise Funds That Report to Regulatory Agencies May Capitalize