Can Pre Construction Costs Be Capitalized
Whether we can capitalize preconstruction costs or not, before we find an answer to this question, let us understand what is a capitalized cost?
The capitalized cost can be understood as the expenditure that you can add to the cost of a fixed asset on the balance sheet. As far as capitalizing New condos in Toronto are concerned. You can add those costs to it that are directly responsible to enhance the value of your asset. Whether it is increasing its efficiency in any way or increasing its cost like labor, material and others.
Let us understand the procedure to capitalize fixed assets
We all are aware that the land has an unlimited life and it is not considered a depreciable asset. If a company or institution is acquiring a land its original cost includes many expenditures. These expenditures are directly related to its acquisition or the preparation of the land so that the institution can use it. Here are a few examples to help you understand that which expenditures can be capitalized.
- The original price of the land
- The commissions you have given in relation to the acquisition of this land
- All the legal fees you have paid to acquire the land
- Survey cost and removal of unwanted building or debris of building from the land
- You can also add improvement costs like landscaping
- Making the land appropriate for its intended use like filling, clearing, draining or excavation
The cost of a building includes all the expenditures you have made to acquire or construct the building. Here are a few major expenditures you can capitalize.
- The buying price of the building
- The money you have spent on renovation or repairing the building for its intended use
- In case you have paid for getting permits related to renovation of the building that can also be included
- Unpaid taxes
Expenditures you can add in the cost of the building.
- The cost of material labor and other overhead expenses, which you have spent in constructing new building
- The money you have spent on excavating land in order to prepare it for the construction.
- All the money you spend on making plans specifications, blueprints and estimates related to the construction of the building
- Fees you have spent on getting building permits
- Engineering and architectural fees
All the landscaping work and improvements related to the building. It could be creating sidewalks within the New condos in Toronto building or wiring in its compound