09 July 2024
Unfortunately, I can't share specific working files or templates directly. However, I can guide you on how to approach the new building capitalization workings and disclosure requirements:
### New Building Capitalization Workings:
1. **Cost Elements:** - **Direct Costs:** Include costs directly attributable to constructing the building, such as materials, labor, contractor fees, and directly related overheads. - **Indirect Costs:** These are expenses that support the construction process but are not directly attributable to it, such as site preparation costs, architectural and engineering fees, permits, and legal fees.
2. **Capitalization Thresholds:** Determine the threshold for capitalizing costs rather than expensing them. Typically, costs are capitalized if they meet or exceed a certain threshold set by accounting policies (e.g., $5,000).
3. **Treatment of Interest:** Depending on accounting standards (like IFRS or GAAP), interest costs incurred during the construction period may be eligible for capitalization under specific conditions.
4. **Period of Capitalization:** Capitalization usually starts when: - Expenditures are incurred. - Activities necessary to get the asset ready for its intended use begin. - Interest costs are being incurred (if applicable).
### Disclosure Requirements:
1. **Financial Statements:** - Include details of capitalized costs in the balance sheet under property, plant, and equipment (PPE). - Provide a breakdown of capitalized costs in the notes to the financial statements, distinguishing between land, building construction costs, and other related costs.
2. **Notes to Financial Statements:** - Disclose the policy for capitalization of new building costs, including thresholds and treatment of interest. - Provide an explanation of any significant judgments or estimates made in determining the costs capitalized.
3. **Impairment Testing:** - If applicable, disclose any impairment testing for new buildings and any resulting impairments in accordance with relevant accounting standards.
### Working Files:
To create working files: - **Excel Spreadsheet:** Create a detailed spreadsheet that lists all costs incurred, categorizes them into direct and indirect costs, applies the capitalization policy, and calculates the total capitalized amount. - **Supporting Documentation:** Maintain invoices, contracts, and other supporting documents that validate the costs capitalized. - **Disclosure Template:** Prepare a template for financial statement disclosures, outlining where each required piece of information should be presented.
Ensure to tailor these workings and disclosures according to your specific accounting standards (IFRS, GAAP) and organizational policies. If you're unsure about any specific details or require further assistance, consulting with an accounting professional or auditor would be advisable.
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