[Anonymous]

Hi All,

Can someone please validate my understanding about Interest Cost on Land acquisition and Land improvements and correct me if I am wrong.

– Interest Cost to acquire/purchase the land should be expensed whenever incurred.

– Land Improvements such as installation of sewage system, fences, paving, etc, should be capitalized as Building cost and depreciated.

– Interest cost on land improvements should be capitalized as building cost during construction period.

Also, how putting office building on land considered a land improvement?

[M.O.D.]

Land improvement is landscaping, or roads, or parking lots, not buildings. Buildings are a separate category.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Anonymous]

Ohh.. Thanks M.O.D. I got it clear now. But while I was studying the book, there came across a point where it said- If a structure is placed on the land, charge the interest cost to the structure (and not the land). Can you tell me why is that so?

[Author]

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