CLASSIFYING PROPERTY - CONSTRUCTION WORK IN PROGRESS - 8610.7

Construction work in progress is used to accumulate costs incurred to construct or develop a tangible capital asset before it is substantially ready to be placed into service (at which time the costs would be reclassified into the appropriate major classification). Depreciation cannot begin until the capital asset is substantially ready to be placed into service.

In addition to direct costs of construction, certain indirect costs can or cannot be attributed to the acquisition cost of a capital asset and ultimately be capitalized.

1. Costs directly related to the acquisition of a specific asset should be capitalized (e.g., salaries and wages of construction employees, materials).
2. Costs related to the acquisition of capital assets, but not to specific projects, should still be capitalized (e.g., construction administration, legal fees, cost accounting, and design fees).
3. General and administrative costs should never be capitalized (e.g., use of office facilities, executive management, accounting, human resources).

Furniture, Fixtures and Equipment (FFE) should never be included in construction work in progress. FFE should be classified as equipment and recorded separately from the asset being constructed.