Final answer:
The FASB generally does not allow for the capitalization of interest costs incurred for inventories that are routinely manufactured. Interest costs can only be capitalized as part of the cost of a qualifying asset, which does not include inventories produced in the ordinary course of business.
Step-by-step explanation:
The Financial Accounting Standards Board (FASB) sets the guidelines for financial accounting and reporting in the United States. According to the FASB, capitalizing interest costs incurred for inventories that are routinely manufactured is generally not allowed. The rationale behind this is that interest costs should be expensed in the period they are incurred unless they are directly attributable to the acquisition, construction, or production of a qualifying asset.
A qualifying asset is typically an asset that requires a substantial period of time to get ready for its intended use or sale. Since routine manufactured inventories are not considered qualifying assets as they are continuously produced and sold in the ordinary course of business, the interest cost cannot usually be capitalized as part of the cost of inventories. Instead, these interest costs should be recognized as an expense in the income statement when they are incurred.