Incidental operations are considered to be any revenue-generating activities conducted during the development period of a property, which are used to reduce the development cost of the property. For example, an organization might elect to continue renting space in an office building prior to tearing it down and replacing it with condominiums. These operations are separate from any activities intended to generate a return on the use of the property.
When there is revenue from these incidental operations, the proper accounting is to first net the revenue against any related costs. Further actions are as follows:
- The excess of any revenues over their costs are accounted for as a subtraction from any capitalized project costs.
- If the costs of these incidental operations exceed their revenues, charge the difference to expense as incurred.