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Last year, the Civil Code introduced the concept of “building right” which is a special property right entitling the owner of this right to have and use a building on someone else’s property. The amendment “fine-tunes” the accounting solution, valuation and depreciation of the institute of building right as an immovable property registered in the Land Registry.
Compared to 2014, the building right is no longer a part of the purchase cost or its technical upgrading. We understand the building right – regardless of the intention of its acquisition, as a separate asset which is charged in a separate account and has its own depreciation regime without regard to the subsequent activation of construction or technical upgrading – to be charged under “Buildings” in the balance sheet. A building right can be purchased free of charge, for a one-off payment or payment in repeated instalments for a fixed period no greater than 99 years. It depreciates over the duration, after which its value is 0 because the settlement of the land owner with the builder, in the case of the extinction of the building, the right only applies to the buildings.
When building rights are purchased together with the building at a single price, it is necessary to divide this price into two parts: one part corresponds to the valuation of the building rights; and the other corresponds to the valuation of construction while respecting the true and fair representation of both assets, i.e. based on the real value of both assets. If you intend to trade the building right, it is still possible to account that asset as goods. From the perspective of the landowner, i.e. the provider of the building right, when entering a building right as a charge, the receivable and the revenue are booked with the principle of respecting the rule of accrual and deferral.
Finally, I would like to point out that, under the transitional provisions, you can proceed as described in the financial statements compiled from January 2015 for accounting periods starting in 2014.