The literature on Fixed Asset does not have specific reference to temporary workstation, amenities rented during the period when the office building is under construction. These rental costs are contracted and paid directly by my company to the vendors while the main contractor only bills us for the actual construction work on the leasehold. The question is whether costs related to these mobile office/workstations, amenities can be capitalized as part of the whole leasehold improvement project under the US GAAP. Thank you.
Temporary Workstation - can be capitalized when your office building is under construction?
Answers
If each rental payment is for period used, then it should be expensed.
The usage of space under leasehold improvement wIll not start until after construction is completed, and therefore, its depreciation will not start until then.
As Kehinde identified it should be expensed. Additional points to remember are that this temporary workstation probably has a useful life less than a year (in which case it would be expensed). Additionally, this expenditure isn't creating a distinct / unique asset. I like to use as an example that US GAAP basically states that all normal costs necessary to bring an asset into its useful state are capitalized - with the key emphasis on the word "normal." The example that is used is if an expense is incurred to fix an asset in shipment or installation - then that doesn't add any value to the asset - it just gets it back to its original state (and is expensed even though it was incurred to get the asset into its place of use). I kind of think of this expense (the temporary workstations) the same way.
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Accounting