Land clasification - Sounds strange, but makes sense..

S

SerGrey

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
Hi guys !

I know most of you will not like this, but......

I've asked my co-worker (accountant) about land (purchased for speculative purposes)

classification in the balance sheet. And her answer was ...(don't laugh)

INVENTORIES !!!!!!!

I found it ery doubtfull at first, but her EXPLANATION was exhaustive :

Since land was purchased in speculative purposes, then it's considered to be realized in short period. Thus it CAN NOT be classified as any LONG TERM position (not assets, not investments). But definitely it can be placed in any CURRENT ASSETS position - assets for sale or inventories.

What do you, guys, think about that? (she works under European standards, maybe US GAAP defines that in the other way?)
 
It would be inventory if it was going to be sold relatively soon and it was inline with their underlying business activities. Otherwise it is a long term investment. cfaboston it should NOT be classified as it normally would, long term asset, as it is not being used to house a facility or used in normal business operations.
 
to cfaboston28

You mean, you have seen reference in Schweser book? Could you name page?
 
Unless the company is a developer/builder...I refuse to accept land held for speculative purposes as inventory.

Its investment. Long-term assets are used in the operation of business.

ok just for kicks..what if the question said...ABC co a REIT, held land for speculative purposes. How would that be treated?
 
It is in FSA book chapter 9 in Capitalized section....I dont remember the page
 
Maybe we're talking about the difference between how an accountant is bound to classify and how an analyst should analyze.
 
You must log in or register to reply here.
Back
Top