Maintenece To Property - Accounting Options

[Paul17]

Hi,

We are planning to dispose of a property in the near future, however there is major maintenance work required prior to the property being advertised and hopefully sold. As these maintenance costs will be booked against the revenue expenditure, are there any options to account for this expenditure differently, for example against the capital receipt on disposal if both transactions occur within the same financial year?

Thanks

 

[bklynboy]

Take a look at ASC 360 for US GAAP. Requires that the asset be classified as held for sale (assuming it meets the criteria) and measured at FV less costs to sell but not higher than the current BV.

Costs to sell are the incremental direct costs to transact a sale, that is, the costs that result directly from and are essential to a sale transaction and that would not have been incurred by the entity had the decision to sell not been made. Typically is for things like broker commissions, closing costs, title fees and the such. These are not maintenance costs since maintenance is typically required if the asset isnt being sold so its important you clarify exactly what costs are being spent and why. If its typical maintenance its expensed otherwise follow guidance in ASC 360.