Capitalization of ground rent and conversion charges

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This discussion explores the accounting treatment for ground rent and conversion charges related to buildings. Conversion charges for moving from leasehold to freehold are generally considered an improvement cost and should be capitalised. However, ground rent itself is typically treated as a revenue expense, akin to rent for vacant land or parking spaces.

CA Parul Saxena

CA Parul Saxena (Querist)
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04 March 2020 whether ground rent and conversion charges of building required to be capitalized?

VIJAY KUMAR

VIJAY KUMAR (Expert)
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05 March 2020 Conversion charges from leasehold to freehold are treated as improvement cost and thus should be capitalised but ground rent paid is to be treated revenue item.

CA Parul Saxena

CA Parul Saxena (Querist)
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05 March 2020 what is ground rent exactly?

VIJAY KUMAR

VIJAY KUMAR (Expert)
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05 March 2020 as far as I know It is simply rent, mainly for the vacant plots.. like rent from parking lots or from oil bunks etc.

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