Kustannuskorko

Kustannuskorko is a Finnish accounting and fiscal term that refers to the interest component embedded in the overall cost of producing goods or services. It represents the cost of using capital over time and is integral to calculating both depreciation and the valuation of assets in financial statements. In the Finnish tax framework, the term is officially defined in the Income Tax Act as the interest that may be added to the cost of production for tax purposes. This allows enterprises to offset their tax burden by recognizing the time value of capital.

The calculation of kustannuskorko typically relies on a base interest rate set by the tax authority, which can be adjusted for inflation or other economic indicators. Companies may apply the statutory rate or a market‑derived rate that reflects the true cost of borrowing or the yield on comparable investments. The resulting figure is added to the purchase price or the capital investments that are depreciated over time, thereby increasing the tax deductible expense.

While kustannuskorko closely resembles the concept of cost of capital, it is more narrowly focused on the interest element that can be apportioned as a cost of production. It differs from the broader cost of capital, which encompasses both debt and equity financing costs. In practice, accounting standards require separate disclosure of kustannuskorko in the notes to financial statements to ensure transparency for auditors and investors.