A church purchased land and constructed a new building on it. How should the church record the land acquisition and subsequent construction of its facility? Are they considered fixed assets and, in relation to the facility, depreciated?
The accounting treatment of this situation depends on the church's choice of accounting method. If a church chooses to follow GAAP (Generally Accepted Accounting Principles), it is required to capitalize all material fixed asset acquisitions, ranging from land and facilities to other long-lived assets exceeding some designated minimum threshold. For example, a church may choose to capitalize and depreciate all assets with a cost greater than $2,500.
If, however, the church uses the cash or modified cash basis of accounting, as most small- to medium-sized churches do, it will not record fixed assets on its books. Therefore, the cost of the land and building will simply be expensed at the time of purchase. Under this method, land and f…