Got a construction contract with independent contractor to provide building services for our company. How do I capitalize CIP for the construction works performed? Ratably over the time of the contract or should there be some work progress report? What's the usual practice for large construction projects?
USA Construction cost capitalisation question
- Thread starter tantoniuk
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Will construct something - a big project that will last over a year
In a long term construction project, builder will invoice you periodically based on contract terms. Record the capital costs into CIP. Someone in your organization should check to see that payment is indeed due by verifying what interim task was completed
"Cause I cant capitalize CIP for the total prepayment amount right away, since the construction work is not yet done."
Then treat it as a deposit paid out. (asset account). Then apply that to CIP when YOUR representative agrees with the contractor that construction milestones have been met.
In a long term construction contract, the contract terms should specify when and how much the contractor is to be paid based on definite construction milestones.
Then treat it as a deposit paid out. (asset account). Then apply that to CIP when YOUR representative agrees with the contractor that construction milestones have been met.
In a long term construction contract, the contract terms should specify when and how much the contractor is to be paid based on definite construction milestones.