Hi Expert,
I am bit confusion on treatment of Demolition cost.
As per US GAAP
- If land and building are purchased with the initial intent to use the land and demolish the building, capitalize the cost to demolish the building as land improvement.
- If land and building are purchased with the initial intent to use the land, demolish the building and build a new building, capitalize the cost to demolish the building as part of the cost of the new building if the demolition occurs soon thereafter.
- If land and building are purchased with the initial intent to use the land and the building, expense the costs to demolish the existing building at a later date. The demolition costs are an expense associated with the cost of using the existing asset and are not capitalized in the cost of the new asset.
I have Two question.
If its a own building and the owner of the building demolishes few floor and builds a new floors whether the demolition cost should be treated as capex or Opex.
If the buiding is purchased on lease and the leasee demolishes the existing Interiors in building and does few leasehold improvement works as per his business convenience will the demolition cost treated as Capex or Opex
its a own building and the owner of the building demolishes existing interiors and builds new interior will the demolition cost treated as Capex or Opex
CAclubindia
