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    Land and Building

    Uploaded by

    Alexander Dimalipos
    This document provides guidance on classifying and accounting for costs related to land and buildings. It addresses: 1) How land should be classified depending on its intended use as either a property, plant and equipment, investment property, or current asset. 2) Which costs are chargeable to the land account, such as purchase price, taxes, and improvements. 3) How to classify land improvements and special assessments. 4) Guidelines for classifying and accounting for building costs, whether purchased or constructed.

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    © All Rights Reserved
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    Land and Building

    Uploaded by

    Alexander Dimalipos
    124 views3 pages
    This document provides guidance on classifying and accounting for costs related to land and buildings. It addresses: 1) How land should be classified depending on its intended use as either a property, plant and equipment, investment property, or current asset. 2) Which costs are chargeable to the land account, such as purchase price, taxes, and improvements. 3) How to classify land improvements and special assessments. 4) Guidelines for classifying and accounting for building costs, whether purchased or constructed.

    Original Title

    LAND AND BUILDING

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    This document provides guidance on classifying and accounting for costs related to land and buildings. It addresses: 1) How land should be classified depending on its intended use as either a property, plant and equipment, investment property, or current asset. 2) Which costs are chargeable to the land account, such as purchase price, taxes, and improvements. 3) How to classify land improvements and special assessments. 4) Guidelines for classifying and accounting for building costs, whether purchased or constructed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    124 views3 pages

    Land and Building

    Uploaded by

    Alexander Dimalipos
    This document provides guidance on classifying and accounting for costs related to land and buildings. It addresses: 1) How land should be classified depending on its intended use as either a property, plant and equipment, investment property, or current asset. 2) Which costs are chargeable to the land account, such as purchase price, taxes, and improvements. 3) How to classify land improvements and special assessments. 4) Guidelines for classifying and accounting for building costs, whether purchased or constructed.

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    © All Rights Reserved
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    LAND

    STATEMENT CLASSIFICATION
    o used as plant site - property, plant, and equipment
    o held for currently undetermined use - investment property
    o held for long- term capital appreciation - investment property
    o held for current sale by a real estate developer - current asset part of inventory

    COSTS CHARGEABLE TO LAND


    a. Purchase price
    b. Legal fees and other expenditures for establishing clean title
    c. Broker or agent commission
    d. Escrow fees
    e. Fees for registration and transfer of title
    f. Cost of relocation or reconstruction of property belonging to others in order to
    acquire possession.
    g. Mortgages , encumbrances and interest om such mortgages assumed by buyer
    h. Unpaid taxes up to date of acquisition assumed by buyer
    i. Cost of survey
    j. Payments to tenants to induce them to vacate the land in order to prepare the
    land for the intended use but not to make room for the construction of new
    building
    k. Cost of permanent improvements
    l. Cost of option to buy the acquired land
    LAND IMPROVEMENTS
    o Non-depreciable land improvements - charge to land account
    o Depreciable (useful life) - land improvement account

    SPECIAL ASSESSMENTS
     Taxes paid by landowner as a contribution to the cost of public improvement
     Part of the cost of land
    REAL PROPERTY TAXES
     outright expense
     Unpaid taxes assumed by the buyer - taxes are capitalized but up to date of
    acquisition only.
    BUILDING
    Cost (by purchase):
    a. Purchase price
    b. Legal fees and other expenses incurred in connection with the purchase
    c. Unpaid taxes up to date of acquisition
    d. Interest , mortgage liens and other encumbrances assumed by the buyer
    e. Payments to tenance to induce them to vacate the building
    f. Any renovating and remodeling for the intended use of the building
    Cost ( by means of construction):
    a. Material used , labor employed and overhead incurred during the construction
    b. Building permit
    c. Architect fee
    d. Superintendent fee
    e. Cost of excavation
    f. Cost of temporary building used as construction offices and tools or materials
    shed
    g. Expenditures incurred such as interest on construction loans and insurance
    h. Expenditures for service equipment and fixtures made a permanent part of the
    structure
    i. Cost of temporary safety fence
    j. Safety inspection fee

    SIDEWALKS , PAVEMENTS, PARKING LOT , DRIVEWAYS


    o Expenditures part of blueprint of new building- building account
    o Expenditures not connected with the construction - land improvements

    CLAIMS FOR DAMAGES


    o Cost of insurance - building account
    o Insurance not taken - outright expense

    BUILDING FIXTURES
    o Movable fixtures (shelves and cabinets) - building account or furniture and
    fixtures (depreciated)
    o Immovable - building account
    VENTILATION SYSTEM , LIGHTING SYSTEM , ELEVATOR
    o Installed during construction -building account
    o Otherwise - Building improvement and depreciated over the useful life or
    remaining life of the building, whichever is shorter.

    PIC INTERPRETATION ON LAND AND BUILDING


    1. Land and building at a single cost
    o Usable Old building - land and building based on relative fair value
    o Unusable old building – land

    2. Old building demolished for the new building


    o New building (PPE or Investment property )- carrying amount of usable old
    building is recognized as a loss.
    o New building ( inventory) - carrying amount of the usable old building is
    capitalized as cost
    o New building( whether the PPE, IP or Inventory) - demolition cost minus
    salvage value is capitalized as cost of the new building
    o Old building demolished to prepare the land for intended use and not for a
    new building - net demolition cost is capitalized as cost of the land.

    3. Building acquired is demolished to make room for new building :


    o Carrying amount of old building is recognized as a loss
    o Net demolition cost is capitalized as a cost of the new building
    o Old building subject to contract lease - any payments to tenance shall be
    charge to the cost of the new building

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