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:
Sent: 04-22-2019 09:40 PM
From: Abigail Bawden
Subject: Subsequent Demolition Costs on Fixed Asset
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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