IAS 16 Asset demolished

[Asnake E]

Hello,

I have one question: a company had a building that it uses as administration office for a couple of years. This year the company has demolished that building and started erection of another new building (that will be real estate for sale). What should be the fate of the net book value of the demolished building, anything specific in IAS 16 on this matter? should it be reported as loss (Dr. demolished building reported under expenses and Cr. the net book value of the bldg) or should the net book value form part of the new building under construction?

[Marek Muc]

I don't think this is specifically covered in IAS 16. In my opinion, the majority of the net book value of the old building should be expensed in P/L since those assets will not benefit the new building. However, if foundations or underground garage (or other items) are retained for the new structure, they could be included in the new building's cost. Will something be reused?

[Asnake E]

Thank you for the reply. Actually, nothing will be used even the foundation for the new building will be constructed anew.