16.1.05 Other General Construction Costs

Enquiry:

Clarification is sought regarding the Guidelines for Accounting & Financial Reporting for NGOs/NPOs.

On page 56 of the Guidelines, para 6.9.38 says:

“In case of self-constructed buildings, the cost would comprise those costs that relate directly to the construction of the building and an appropriate portion of other general construction costs.”

Can you please clarify what does other general construction cost mean?

Also please confirm will the cost of Finance and HR personnel involved in the financials and hiring of personnel related to the project such as construction of a University or Hospital will be capitalized in the cost of Capital work-in-progress (CWIP) or will it be expensed out.

Opinion:

The Committee is of the view that ‘other general construction costs’ may refer to costs which are not a component of the cost of property, plant and equipment but they can be directly attributed to the acquisition or construction of the asset or bringing the asset to the location and condition necessary for it to be capable of operating in the matter intended by the management.

With regard to cost of Finance and HR personnel, the Committee is of the view that it does not appear to be directly attributed to the construction of Project.

(November 8, 2010)