Business Procedures Manual

Fiscal Affairs Division

7.3 Land and Land Improvements

7.3.1 Land Definition

(Last Modified on May 1, 2017)

Land is the surface or crust of the earth, which can be used to support structures, and may be used to grow crops, grass, shrubs, and trees. Land is characterized as having an unlimited life (indefinite).

7.3.2 Land Improvement Definition

(Last Modified on May 1, 2017)

Land improvements consist of betterments, site preparation and site improvements (other than buildings) that ready land for its intended use. The costs associated with improvements to land are added to the cost of the land.

7.3.3 Depreciation Methodology

(Last Modified on May 1, 2017)

Land and land improvements are inexhaustible assets and do not depreciate over time.

7.3.4 Capitalization Threshold

(Last Modified on May 2, 2017)

All acquisitions of land and land improvements will be capitalized. Expenditures to be capitalized as land and land improvements should include:

  • Original purchase price or fair market value at time of gift
  • Commissions, such as brokers鈥 commissions
  • Professional fees, such as title searches, architectural, legal engineering, appraisal, surveying, environmental assessments, etc.
  • Land excavation, filling, grading, drainage, etc.
  • Demolition of existing buildings and improvements, less salvage
  • Removal, relocation, or reconstruction of property of others, such as railroad tracks, telephone lines, power lines, etc.
  • Interest on mortgages accrued at date of purchase
  • Accrued and unpaid taxes at date of purchase
  • Other costs incurred in acquiring the land
  • Water wells, including the initial cost for drilling, the pump and its casing, etc.
  • Rights-of-way

Note: Land and Land Improvements held as investments should not be recorded as capital assets. They should be recorded as investments at fair value, with any changes to fair value being reported as investment income.

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