Land Development cost

This query is : Resolved

Guest

Guest (Querist)

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)

I think it should be part of Land cost.

Please post your views on the issue.

Thanks

Priya

Aditya Maheshwari

Aditya Maheshwari (Expert)
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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.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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14 July 2010 If its a case of builder then it makes no difference as all expenses are trfd to the WIP a/c and eventually trfd to P & L A/c

In case its for own use then land development cost will form part of land as it is being improved so that building can be formed on it.

Guest

Guest (Querist)

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

Aditya Maheshwari

Aditya Maheshwari (Expert)
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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.

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