Demolishing & Capitalising Assets

[TONYKC]

Dear All,

Have a situation here, hoping to get your point of view if possible please.

For instance, our Council purchased a property two years ago, it costed $1.8M in total, with $1.5M in land value and $300K in the dwelling.

The property was recognised in the Asset Register under two different categories, Land and Buildings.

The purpose of the acquisition was to turn the site into a park, but the construction plans were deferred, so the house was leased for the period.

Currently in the Asset Register, the land value stayed the same at $1.8M, and the dwelling has been depreciated to say $193K.

Council has decided to start the construction now, demolishing the house in preparation to build the park.

The house would have to be write off from the Asset Register, therefore, recognising a loss of $193K in P&L.

Is there any other way to treat the $193K? Can it be part of the capitalisation costs of the new asset?? Because you can't build the new park without removing the old house on the site.......

Your reply to our query is much appreciated.

Thanks in advance,

TONY