The document describes a company's policy and process for quarterly capitalization of interest for large projects over $2 million that are funded by borrowing. It involves three steps: 1) estimating interest expense and booking it, 2) an automated system posting the expense to assets, and 3) a reclass entry debiting a non-op account and crediting interest expense to track amounts capitalized. Key roles include Treasury calculating interest rates, FP&A booking entries, and fixed asset accounting ensuring proper asset assignment.

1. Interest Capitalization The xxx policy for Interest capitalization (for projects > $2 Million) assumes a large project is funded (directly or indirectly) by borrowing and interest payments are being incurred (e.g. an expense is being booked). The Quarterly Capitalization of Interest process consists of 3 steps/entries with the end result of creating a credit amount on the P&L in account xxxxx Interest Expense. This credit amount represents an estimate of the amount of interest that has been paid on the project and is allowed to be capitalized per GAAP. This credit amount on the P&L will be amortized in future months through the FA system posting depreciation expense to the capitalized asset. Step/Entry 1 The FP&A Mgr will estimate the amount of interest expense incurred by utilizing average treasury rates provided by the Treasury department. The FP&A Mgr will book this estimate to the appropriate WBS element utilizing account xxxx – Interest expense. This entry creates a $0 net impact in account xxxx and triggers settlements to run. Process Overview

2. Step/Entry 2 The automated Settlements process will post the interest expense to the asset in the FA SAP system utilizing the WBS number. Once Settlements have run the system credits … the AUC/AUD account. Step/Entry 3 The FP&A Mgr will create a reclass entry. This entry will debit the Other non-op account xxxxx, which will offset the credit entry created in step 2 above for a $0 impact to the other non-op account, and credit interest expense xxx which can be used to track interest expense capitalization in SAP. Note 1 - The Interest Capitalization process is currently done quarterly. Note 2 – Steps 1 and 3 are currently part of the same entry. Interest Capitalization Process Overview

3. Determination of Interest Rate Booking Interest Capitalization entry Review/Report Corporate Non-op P&L Impact Role: Responsibility: Treasury - Quarterly Interest Capitalization Process Roles and Responsibilities Calculation of Interest Expense Manager/Special Determination of the average accumulated expenditures made for the asset during the capitalization period. Calculation of Interest expense using Rate from Treasury. Determination of the capitalization rate based on the weighted-average interest rate on outstanding borrowings Communication of Rate to FP&A Analyst. Book the Interest Capitalization entry. Book the reclass entry Subject Matter Expert Issue Resolution Manager/Special FP&A - Review/Report Corporate Non-op P&L Accounts Timing: Prior to Quarter End Business Day 1 EOD Business Day 2 EOD Business Day 5 EOD Balance Sheet / Projects Review Fixed Asset Accountant – Utilize the FA System to assign the interest to the correct Asset/WBS element Review of AUC projects and Fixed Assets Subject matter expert Issue Resolution Business Day 3 Noon

4. AUC & AUD Fixed Assets Project Charges Settlements Additions (Charge Allocations) Account AUC (Ppe) & Account = AUD (Intang) * Quarterly Interest Capitalization Journal Entry Entry 1 Entry 2 Automated Entry 3 Interest Inc (Exp) Capitalized Interest Inc (Exp) Capitalized AUC Default Non Op Clearing Interest Inc (Exp) Capitalized Default Non Op Clearing Settlements Impact Books expense to WBS project and triggers Settlements to run Creates AUC Balance and credits P&L Other NON op Reclasses Capitalized Interest expense to tracking account in