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  • 1.  Subsequent Demolition Costs on Fixed Asset

    Posted 04-22-2019 09:40 PM
    A subsequent decision was made to demo a building years after acquisition. The net book value will debit gain/loss, however I'm lost on where the demolition costs will get expensed to.  Should I be debiting gain/loss for the demolition costs? Or repair costs? The difference is: repair costs hit Direct Costs (Operating Income) while gain/loss hits Other Income/Expense. 

    I've read articles that state it's a repair cost, but I have also read that for tax purposes it should hit gain/loss.

    Any insight would be great!

    Abbi

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    Abigail Bawden
    Assistant Controller

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  • 2.  RE: Subsequent Demolition Costs on Fixed Asset

    Posted 04-23-2019 03:31 PM
    Treat the demo costs like you would treat a new building component such as Air Conditioning or Roof. The book value of those items includes installation costs. Demolition costs would similarly be added (subtracted) from the building cost and including in gain/loss. 



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  • 3.  RE: Subsequent Demolition Costs on Fixed Asset

    Posted 04-23-2019 04:53 PM
    Abigail, 
    What's the nature of business? 
    The cost of demolition will be reduced by the sale of any scrap materials sold. Then the demolition expenditures will be treated as operating expense if the business is real estate development, or you can contain it into the building cost of the replacement building as the expense for making the ground ready for construction !
    and if you are not real estate, the demo expenses would hit other expenses (I hope its value is not so big).

    Regards, 
    Ashraf , CIA, CMA
    Finance director

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    Ashraf Hegazy [CIA, CMA (ii)]
    CFO
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    Original Message