Land acquisition for real estate & previous investments

[ventura]

Dear community,

A customer (real estate)  needs to make previous work before to buy-invest in a land.

this land is not yet an asset in their balance sheet.

customer might have already costs (architects...)

Do we need to include the value of the land in the project in PPM or can
we leave it aside as this land is not the property of the Real Estate company ?

many thanks in advance

Monique

[former_member210872]

Hi Monique,

Its depend on 2 major things,

1. What type of land you are going to purchase eg. Forest land, private land, agricultural

2. Purpose of land purchase eg. Personal use, Public Purpose, private cum public use based on that you may entitle to get refund on money spend over land & infrastructure by the Govt..

So, As told by expert above you have to create asset under construction
(AUC) using investment project on WBS.

Settle OPC (Other project cost) & actual cost of land as expense + refund from Govt.(if any) as revenue  on AUC/Final asset & capitalise it.

With regards,

Dnyanesh

[Former Member]

Hi Monique,

Only few suggestions.

Land has to be an asset in company's balance sheet too because over the years, it will give you the profit.

Else,

if it just for the expense then its better to create WBS as LAND and SUB WBS as Overhead Expenses, then just capture the actual/direct cost on those WBS including the expenses prior to purchase of this land.

Else,

If you think that in future it will be part of company's balance sheet, then go as per Sammar's suggestions.

Regards,

Amit.

[sammar81]

Hi Monique,

If I have understood your question correctly, You are asking about Settling of the Expense incurred on acquiring an Asset.

well It depends upon the Business how they want to treat the expenses. In your case let's assume before investing in the Land they need to hire some Architects and Design Engineers and this will cost them Money, before making the decision on Investing in the Land.

To capture such a scenario in SAP PS, we have something called as AUC. You can create a Project and Assign an Investment Profile to the WBS and create a AUC as Land. You can settle this cost to AUC and then once the land is actually  acquired you can add the cost of land + previous expenses into the asset by settling the previous expenses+actual cost of land to the final ASSET.

If the business doesn't want to add the previous cost to the value of Asset it can be written off...

Hope it helps you...

Regards

Sammar

Message was edited by: sammar razdhan