TO: Interested Ministries FROM: Jim Bramer, Retired Auditor-CPA
RE: Raw Land - Investment or Fixed Asset Originated: March 2003
Below is a hypothetical Online Email thread (THRD) between Jim@bcidot.org and one of the these Ministry MFTeam members: PAT (Ministry Executive), LEE (Ministry Volunteer Treasurer), and FRAN (Ministry Computer Bookkeeper).
There seems to be some question as to how we are showing some raw land as an asset on our books. Apparently there are times when we should show it at at 'original cost', but at other times we should show it at the year end at it's "current market value." Please give me your "spin" on this, Jim.-
I trust the following hypothetical "Fact Patterns" adequately express my views on this topic.
Supposed Fact Pattern #1:
- Adjacent raw land purchased by the Ministry 10 years ago for $100,000 with the intent to ultimately build an addition to our facility.
- It currently is still on the books at $100,000 as a part of the Land, Building and Equipment (LB&E) equity account
- The Ministry has not build any structures on this raw land and the documented Fair Market Value (FMV) is now $500,000
There is no current building plans -- no money is on hand for such a project.
Believed GAAP application:
- A material non-depreciable investment asset have increased in value
- Such an asset is now viewed as an investment for GAAP purposes
- The dollar amount on the books is increased by $400,000 with the offset as a increase to the
Land, Building and Equipment equity account.
- The footnotes to the GAAP compliance annual financial report should explain this "Adjustment."
Let me know at Jim@bcidot.org you would like a sample Ministry year end footnotes and columnar fund report, etc.
Supposed Fact Pattern #2:
- Adjacent raw land purchased by the Ministry two years ago for $100,000 with the intent to ultimately build
- Still on books at $100,000 as a part of the Land, Building and Equipment (LB&E) equity account
- The property has not been improved or any facility added.
- The Fair Market Value (FMV) now is $300,000
- A Building program is underway that includes a pledge effort for same.
Believed GAAP application:
- Such an asset is NOT viewed as an investment for GAAP purposes
- The undepreciated historical cost of $100,000 remains on the books.
- If it serves any financing purpose, the Church would have an option to get an appraisal and include such information within the text only of the year end report footnotes.
From: Pat --
Very helpful, Jim, thank you.
The bulk of this Publication originated in March 2003 and was UPTD: March 09, 2012 Click here and go to List of threads (THRDs) at www.bcidot.org
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(1) An Online Document, or WRIT (Writing), may be applicable to all Ministries, or it may be designed for just groups like: Evangelical Church, School, Missionary Agency or Organization, Christian Camp / Conference, or other named group.
(2) WRIT formats include the perspective of Jim@bcidot.org via IOMs (Inter-Office Memos) to the Ministry Finance Team (MFTeam); THRDs, or a hypothetical Online conversation (thread) with members of a MFTeam; FWIW; A periodic editorial (For What it is Worth); TRUISM, or believed Ministry Finance principles; or via a FAQ, or a response to Frequently Asked Questions.