14 July 2010
I have a doubt about the accounting for the land development costs.
In a big land a commercial complex is to be constructed
Expenses are incurred for making the land fit for construction of building. This we call as Land developement expenses.
I am little confused whether the said Land development cost should be capitalised as part Land cost or as CWIP(all expenses incurred untill the constrcution of the complex are held in CWIP)
14 July 2010
Could u further inform whether building is beng contructed for own use or to be made and sold i. e. what is the nature of business of the company a builder or something else.
14 July 2010
The company is currently showing all the expenses including Admin expenses in CWIP and not as WIP. The company will build the Mall which will be capitalised as Fixed asset.
Land development exp are incurred to make the land fit for building structures on it.
As per AS 10 all costs incurred to make the asset ready for intended use should be capitalised as part of the Asset cost.
Here the Dev exp is incurred to make the land ready for its intended use i.e building the mall. why it should not be capitalised as Land cost? Pls clarify sir
14 July 2010
Mistake in the above post. It should be read as Then land development cost will form part of land as it is being improved so that building can be formed on it.