IAS 16

An entity started construction on a building for its own use on 1 April 20X7 and incurred the following costs: $000 Purchase price of land 250,000 Stamp duty 5,000 Legal fees 10,000 Site preparation and clearance 18,000 Materials 100,000 Labour (period 1 April 2007 to 1 July 2008) 150,000 Architect’s fees 20,000 General overheads 30,000 ––––––– 583,000 ––––––– The following information is also relevant: • Material costs were greater than anticipated. On investigation, it was found that materials costing $10 million had been spoiled and therefore wasted and a further $15 million was incurred on materials as a result of faulty design work. • As a result of these problems, work on the building ceased for a fortnight during October 2007 and it is estimated that approximately $9 million of the labour costs relate to this period. • The building was completed on 1 July 20X8 and occupied on 1 September 20X8. Required: Calculate the cost of the building that will be included in tangible non-current asset additions