CLASSIFYING PROPERTY - LAND - 8610.1

(Revised 10/2020 and renumbered from 8611)

Land is real property and includes natural elements that are attached with an indefinite useful life. The amount recorded as land is the purchase price plus all the related costs to prepare the land for its intended use. Land is recorded as a separate capital asset, even if it is closely associated with another capital asset. For example, the land under a building or highway must be classified as land rather than as part of the cost of the building or highway.

Examples of related additional costs include:

• Legal and title fees
• Professional fees of engineers
• Attorney fees
• Appraisers fees
• Financial advisors
• Easements
• Cost of demolition or removal of unwanted structures
• Closing costs
• Appraisal and negotiation fees
• Surveying fees
• Damage payments
• Excavation, filling, and grading

Reporting Land Use Rights

Easements or mineral, timber and water rights acquired with the purchase of the underlying land should be included in the total cost of the land. If land use rights are purchased separately, do not include these land use rights as part of the cost of land. Instead, record the land use rights as an intangible asset. See SAM section 8615.2, Land Use Rights.