Skip to Content
author's profile photo Former Member
Former Member

Land acquisition for real estate & previous investments

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

Add a comment
10|10000 characters needed characters exceeded

Assigned Tags

Related questions

3 Answers

  • Posted on Sep 30, 2014 at 03:07 AM

    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

    Add a comment
    10|10000 characters needed characters exceeded

  • author's profile photo Former Member
    Former Member
    Posted on Sep 30, 2014 at 05:26 AM

    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.

    Add a comment
    10|10000 characters needed characters exceeded

  • Posted on Sep 30, 2014 at 05:47 AM

    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


    Add a comment
    10|10000 characters needed characters exceeded

Before answering

You should only submit an answer when you are proposing a solution to the poster's problem. If you want the poster to clarify the question or provide more information, please leave a comment instead, requesting additional details. When answering, please include specifics, such as step-by-step instructions, context for the solution, and links to useful resources. Also, please make sure that you answer complies with our Rules of Engagement.
You must be Logged in to submit an answer.

Up to 10 attachments (including images) can be used with a maximum of 1.0 MB each and 10.5 MB total.