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Hello Sir,
I have a question regarding land and building. According to IAS 16, they are reported separately. Is there a case when land is capitalized in cost of building? I mean, for example, from 100% of land, 20% is used for construction of a building, and the remainder is free of buildings. That part 20% should be capitalized or not? I mean, that part of the building which is under the building, should be capitalized or not in cost of the building? Assume the building is used for administrative purposes, so IAS 16 should be applied. Thank you in advance.
Hi,
Land and buildings are treated separately in that buildings are depreciated and land is not depreciated.
If you construct a building on part of the land the building will be capitalised and depreciated. None of the land is depreciated.
Thanks
Chris
Dear Chris, thank you.
Would you please explain why in acca technical article IAS 16, the link:
In second example (Construction of Deb and Ham’s new store), cost of land is included in cost of the store. Is it a mistake or something special with it?
Thanks for your help!
Hi,
They are calculating the costs to be capitalised as part of the land and buildings category, so both the cost of the land and the costs to construct the building will be included within the category.
There is no mistake, nor is there anything special about it.
Thanks
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