This treatment is consistent with the generally accepted accounting principles stating that costs related to preparing an asset for its intended use are to be included in the cost of that asset. Land improvements as part of land cost Land related expenditures in the first category are usually included in the cost of land acquired. Companies donating the asset --- in this case, land --- simply mark it as a charitable contribution. Bottom Line: Land is an asset, not an expense. International Financial Reporting Standards (IFRS) stated that initially fixed assets to be recorded at cost, but they allow two models for subsequent accounting for fixed assets, namely: Cost Model and Revaluation Model. It is the efficient use of these resources that in many cases determines the amount of profit corporations will earn. Accountants must document the date the land … The accounting for International Accounting Standard (IAS ®) 16, Property, Plant and Equipment is a particularly important area of the Financial Reporting syllabus. These resources are necessary for the companies to operate and ultimately make a profit. I always just put in an asset account; “brand” it non-depreciable. Land acquisition and land development activities pave the way to construction activity. Property, plant and equipment is initially measured at its cost, subsequently measured either using a cost or revaluation model, and depreciated so that its depreciable amount is allocated on a systematic basis over its useful life. At times, this results in inconsistencies in the treatment of properties between one entity and another. Land is a non-depreciable asset. Property, plant, and equipment (fixed assets or operating assets) compose more than one-half of total assets in many corporations. IFRS 16 is a new lease accounting standard published by the International Accounting Standards Board (IASB) in January 2016. Improvements on land have to be accounted for separate from the land. Concerns may arise when accounting for land and buildings in an entity’s financial statements, especially when determining their recognition, classification and measurement. IAS 16 outlines the accounting treatment for most types of property, plant and equipment. 2. What is Fixed Assets Revaluation? IFRS 16 changes the way that companies account for leases in their financial disclosures, especially their balance sheets and income statements. The Financial Accounting Standards Board has very specific directions for recording donated assets. In most instances, a land acquisition and development company is segregated into its own company for tax and legal liability reasons, but occasionally those activities are also included within a construction company’s accounting system. If you need help with a specific case, check with a local accountant for details. Fixed Assets revaluation is the process of increasing or decreasing the carrying value of fixed assets. The receiving company, however, has a bit more work to do. You can almost guarantee that in every exam you will be required to account for property, plant and equipment at least once. This article will look into the accounting treatment of properties.