Construction counters

[Musicwhiz]

Yeah sorry you have a point on that. I was more assuming we are dealing with properties for either sale or rental. If for rental then it's accounted for as a fixed asset; if for sale then as inventory.

So you are correct - if asset is inventory then it will suffer from impairment or obsolescence if it cannot be sold (at Balance Sheet date, a check will be performed by engaging a valuation company such as Colliers or Knight Frank). If the asset is a fixed asset, then rental income is derived from it and it should be depreciated. Then again, property held as fixed assets are also revalued every year, and the revaluation difference taken to P&L (if a loss) or Balance Sheet (as a capital reserve). So te depreciation may have to be re-computed, and it's a complicated process (which is why we have dedicated people called Fixed Asset Accountants in large property companies).

As mentioned, I am not aware of the detailed accounting entries for construction companies as I am not in this industry. But I will go read up more and find out, because it's my interest to know this as well!

Thanks!