Final answer:
The capitalization period of interest begins when expenditures are incurred on an asset being constructed. Among the given options, (option b) project completion is closest, but expenditures are the actual triggering event.
Step-by-step explanation:
The capitalization period for interest is a specific time frame during which interest incurred on money borrowed to finance the construction of property, plant, and equipment is capitalized as part of the cost of the asset being constructed rather than being expensed immediately.
According to accounting standards, one of the conditions that must be present for the capitalization period of interest to begin is expenditures being incurred.
This is due to the fact that the capitalization of interest is only considered when costs are being incurred to bring an asset to a condition and location for its intended use.
Hence, among the given options, the closest option may be project completion, but the actual answer would be when expenditures are being made on the asset.
Accumulation of expenses on the asset and preparation for its intended use are primary triggers for the capitalization of interest, which occurs before the project is completed.
Unlike capitalization, depreciation adjustment is related to allocating the cost of an asset over its useful life and is not a prerequisite for the capitalization of interest to start.