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Construction in Progress

xAssets Fixed Asset Management User Guide
Section 3 – Financial Setup

Construction in Progress

Construction in Progress (CIP), also known as Capital Work in Progress (CWIP), tracks expenditure on assets that are being built, developed, or installed but are not yet ready for use. CIP assets accumulate costs over time and are capitalised (converted into a fixed asset) once construction or development is complete. This page explains when to use CIP, how costs accumulate, and how the capitalisation process works in xAssets.

Prerequisites

  • You must be in the Fixed Asset Management profile (see Fixed Asset Management Profile).
  • You should understand your organisation's capitalisation policy — specifically, the threshold at which accumulated costs become a fixed asset.
  • Depreciation types and accounting periods should already be configured (see Depreciation Types and Accounting Periods).

When to Use Construction in Progress

Use CIP when expenditure for an asset occurs over multiple periods before the asset is ready for service. Common scenarios include:

Scenario Example
Building construction A new office building with costs spread over 18 months
IT infrastructure projects A data centre buildout with hardware, cabling, and installation costs
Software development Capitalised development costs for an internally-built application
Equipment installation A production line requiring staged delivery and assembly
Leasehold improvements Fit-out costs on a leased premises accumulated before occupancy

The key characteristic of a CIP asset is that it should not be depreciated until it is placed in service. Costs accumulate against the CIP record during the construction phase, and depreciation begins only after capitalisation.

How CIP Works in xAssets

Phase 1: Creating the CIP Record

  1. Create a new asset record in the appropriate CIP category (e.g., "Construction in Progress" or "Capital Work in Progress").
  2. Set the asset status to indicate it is under construction — typically a status value such as "Under Construction" or "CIP".
  3. Assign a depreciation type of No Depreciation to prevent the system from calculating depreciation charges during the construction phase.
  4. Enter the initial cost, if any, in the original value field.

Tip: Use a dedicated CIP category to make it easy to query and report on all assets under construction. This also allows you to assign category-level defaults (such as "No Depreciation") so that new CIP records are configured correctly automatically.

Phase 2: Accumulating Costs

As costs are incurred during construction, record them against the CIP asset:

  1. Open the CIP asset record.
  2. Add cost transactions using the financial transactions tab. Each transaction records:
    • The date of the expenditure
    • The amount
    • A description of the cost component (e.g., "Foundation works", "Electrical installation", "Server hardware")
    • The nominal code for the expenditure
  3. The asset's Original Value increases with each cost addition, reflecting the total expenditure to date.

Multiple cost transactions can be recorded over the life of the project. The system maintains a full audit trail of all costs added to the CIP record.

Tip: Attach supporting documents (invoices, contracts, quotes) to the CIP asset record so that all project documentation is in one place. See Attaching Images and Documents.

Phase 3: Capitalisation

When construction is complete and the asset is ready for use, capitalise it by converting the CIP record into a live fixed asset:

  1. Open the CIP asset record.
  2. Change the Category from the CIP category to the appropriate fixed asset category (e.g., "Buildings", "IT Equipment", "Plant and Machinery").
  3. Change the asset Status to "In Service" (or your organisation's equivalent).
  4. Set the Date In Service to the date the asset was placed into service.
  5. Assign the correct Depreciation Type for the new category — the system will use the category default if one is configured.
  6. Set the Recovery Period (useful life) based on your organisation's depreciation policy.
  7. Save the record.

From the next period-end run, the system will begin calculating depreciation on the capitalised asset using the accumulated original value and the assigned depreciation type.

Warning: Ensure the Date In Service is set correctly. Depreciation calculations use this date as the starting point. An incorrect date will produce incorrect depreciation charges for all subsequent periods.

Partial Capitalisation

In some cases, a CIP project produces multiple distinct assets. For example, a building project may result in separate asset records for the building itself, the land, and specialised equipment. In this scenario:

  1. Create new asset records for each distinct asset being capitalised.
  2. Allocate the appropriate portion of the accumulated CIP costs to each new record.
  3. Reduce the CIP record's value by the capitalised amounts.
  4. Once all costs have been allocated, dispose of the CIP record with a zero net book value.

Reporting on CIP

Use the following approaches to monitor and report on CIP assets:

  • CIP Category Query — navigate to the CIP category in the asset register tree to see all assets under construction and their accumulated costs.
  • Financial Transactions — review the cost transactions on individual CIP records to see the breakdown of expenditure.
  • Period-End Reports — CIP assets with "No Depreciation" will appear on reports with zero depreciation charges, making them easy to identify.

Key Considerations

Topic Guidance
Depreciation during CIP CIP assets should not be depreciated. Assign "No Depreciation" as the depreciation type during the construction phase.
Interest capitalisation If your policy requires capitalising borrowing costs, add these as separate cost transactions on the CIP record.
Impairment If a CIP project is abandoned or its value is impaired, record a valuation adjustment before disposing of the record. See Valuations.
Multi-company In multi-company environments, ensure the CIP record is assigned to the correct company. When capitalising, verify the company assignment carries through to the new asset. See Multi-Company Environments.
Budgets CIP expenditure can be tracked against budgets. See Budgets.

Tips

Tip: Create a dashboard query that shows all CIP assets with their accumulated value and the date they were created. This gives project managers a quick overview of capital projects in progress.

Tip: Use the asset history log to track who added costs and when. This provides an audit trail for capitalisation decisions.

Warning: Do not leave assets in the CIP category indefinitely after construction is complete. Un-capitalised CIP assets will not be depreciated, which may result in misstated financial reports.