wal mart self constructs new stores using both its employees and outside contractors 565376

Wal Mart self constructs new stores using both its employees and outside contractors. The new stores, when completed, will provide Wal Mart with future benefits. This example differs in that Wal Mart (1) incurs part of the cost internally, and (2) makes expenditures over time to construct the stores instead of acquiring a completed asset. The store buildings in process provide evidence of the likelihood of future benefits; during the construction process the accumulated construction costs measure the cost of those benefits. All expenditures during the construction process are part of the cost of the self constructed asset. When Wal Mart completes construction of the stores, it will compare the accumulated construction costs with the fair value of the stores. If accumulated construction costs exceed fair value, Wal Mart will decrease the recorded amount of the asset and recognize a loss. If fair value exceeds accumulated construction costs, Wal Mart will not increase the recorded amount of the asset and recognize a gain.