What is a facility under construction

Payments on account and assets under construction

Advance payments made Property, plant and equipment exist when the remuneration has already been paid in full or in part, although the services have not yet been or not yet fully carried out. Such down payments are purely in the nature of a claim. The capitalization is intended to show that investments have been made in fixed assets. They differ from the other assets in the cause of their creation (there is only one payment and no delivery or service as with other assets). Payments on account are to be capitalized with the acquisition costs.

AtConstruction in progress it concerns assets, the production of which has not yet been completed. It does not matter whether the production is carried out by your own company or by a third party. All expenses related to the construction of the plant are temporarily recorded and capitalized in the "Plant under construction" account. Assets under construction are valued at partial production costs incurred up to the balance sheet date.

Scheduled depreciation

Both assets under construction and prepayments - even on tangible assets that are subject to wear and tear - are not subject to scheduled depreciation, as depreciation generally only begins with the delivery or completion of the asset.

Click here to expand Company XY transfers the acquisition costs for a machine in the amount of € 11,900 (including VAT). The machine cannot be delivered yet.

The down payment is made on a depreciable fixed asset. The machine has not yet been delivered, which is why the down payment is capitalized without scheduled depreciation under the down payments made, assets under construction.

The booking rate for access is:  

Advance payments made, assets under construction    10.000 € at   
Input tax     1.900 € atBank    11.900 €
Click here to expandThe machine is delivered.

Rebooking of the down payment made

The € 10,000 (excl. VAT) that has been paid down must be transferred from the item "Advance payments, assets under construction" to the item "Technical equipment and machinery (TAM)".

TAM    10.000 € atAdvance payments made, assets under construction   10.000 €

From the time of receipt, the machine must be depreciated over its normal useful life.

Extraordinary depreciation

Unscheduled depreciation must be carried out if the value of the expected asset has fallen below the value of the down payment or the partial production costs on the balance sheet date.

Click here to expand Assets under construction and prepayments are not subject to scheduled depreciation. Unscheduled depreciation must be carried out in the event of permanent impairment.