Accounting/CF question... should be simple...Real Estate... investment, question, remember, regular, Estate

homie

Hey guys,
This is a silly question but I don’t remember the rules on this classification (may be level 1, who knows, having a brain fart)
Revenue - COGS - SG&A - Interest - Taxes = Net Income
NI + NCC + WC Inv = CFO - CapEx + Int (1-t) = FCFE
So CapEx is not considered part of SG&A and the purchasing of inventory is a regular expense
So…
Is real-estate investment (ie., purchasing of land for future development and/or sale) supposed to be considered investment in inventory, so WC Inv and above CFO line, or CapEx?

bolligerallstar

I think you’re mixing the treatment of land held for sale with property being constructed .
Only remember this vaguely. Usually, investment property is carried at historical cost for GAAP companies. However, neither GAAP nor IFRS dictate how this entity gets reported. You’d continue to show depreciation as usual. IFRS allows fair valuation, too.
If you’re in the business of constructing properties, then any building materials and “finished goods” would be carried as inventory. When you sell the property, you expense it under COGS.
Not sure about that formula you posted… too tired to decipher it. Superficially, it looks wrong.

comp_sci_kid

So many problems with your statements and question I don’t even know where to begin.