A company borrows $100 million for the construction of a new factory. The construction takes 2 years. How should the interest incurred during these 2 years be treated? 

Under accounting standards (like AS 16 or IAS 23), interest on "qualifying assets" (assets that take a substantial period to get ready) must be capitalized as part of the asset's cost (Capex) until the asset is ready for its intended use. • Qualifying Asset: A factory constructed over a long period (e.g., 2 years) is a qualifying asset because it takes substantial time to get ready for use. • Capitalization: Interest costs accrued during the construction phase are added to the Capital Work-in-Progress (CWIP) account in the Balance Sheet, rather than being charged immediately to the Profit & Loss statement.