I have a client who has purchased some land and is planning to build a training centre on it. The land cost is obviously capitalised, but the question is what to do with the costs relating to the building, so far these are mainly fencing, legal fees, planning etc as building has not actually started. As they will create a new asset (the training centre) should they be Development costs with the option to capitalise or put as expenditure? The expenditure will go over more than one financial year as the planning process has been very long.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
There are several criteria but it all boils down to whether they have enough money to see it through from the outset and there must be a reasonable expectation of profit.
slight differences between whether you are doing this under UKGAAP or IFRS (for example under IFRS the intention must be to Sell or Use the asset whereas under UKGAAP the intention must be to sell it).
I think that the general rule for most companies (other than the likes of Glaxo) is that R&D is expensed rather than capitalised.
All the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
That was my thinking. I guess it doesn't in itself generate profit, as it is just a building, the training service which already exists in a rented property is the actual thing that produces the income. Would you show the total expenses in their own nominal in your opinion, or put the prof fees to prof fees etc?
What happens when building starts - bricks, mortar, builders etc. It would seem logical that they are all capital and then once the building is finished, have it valued and revalue the asset in the accounts....
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Personally, I would put all the regulation and planning costs as expenses in their own categories... I know a lot of these won't be there every year but it'll be useful for the owner to see how much it's cost separately and together (you can always group these together on the accounting software can't you?).
With regards to the actual building costs (bricks and mortar), I'm a bit confused at to what you are asking... If you give it to me on more simple terms I'll see if I can come up with a helpful answer... Bear with me, I'm a student! Hehe!
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Please correct me if I'm wrong... I am only human sucking up knowledge... Sometimes bits leak out!
Just an update, according to my text book all costs to do with building a business premises, including r&d are capital expenditure, and it should all be capitalized. I'm only studying GAAP... Hope this helps!
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Please correct me if I'm wrong... I am only human sucking up knowledge... Sometimes bits leak out!
