Start of depreciation

[nysl]

Hi all,

Need advice, may I ask when will you start depreciating an asset for a renovation cost?

1) After the fit-out work completed (pending for FS cert and submission of as-built drawings) or,
2) Upon receiving all documents (as above).

The contract milestone is as below;
45% - upon completion of 50%
45% - upon completion of remaining 50%
5% - upon obtaining fire safety cert, submission of as-built drawings
5% - final 5% (12 months retention)

 

[Fidget]

In general an asset is depreciated from the point in time that it is ready for its intended use. For a renovation that might be once it's fully completed, or in stages depending upon the size/scale of the renovation project.

The milestones you mention sounds like they're the points in time that you'll be invoiced for the cost. These can be capitalised as 'assets under construction' (AUC) - assets under construction are not depreciated. Then once ready for intended use whether in full or in stages, costs are moved from AUC to the relevant PPE account and depreciation begins.

As an aside, if there's associated borrowing costs (interest on loans to finance the project) you can capitalise those as well.