Incidental operations definition
/What are Incidental Operations?
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. These operations are separate from any activities intended to generate a return on the use of the property.
Accounting for Incidental Operations
When there is revenue from 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.
Example of Incidental Operations
As an example of incidental operations, a builder elects to continue renting space in an office building prior to tearing it down and replacing it with condominiums. The rental payments received by the builder are used to offset the subsequent tear down and construction costs of the building.