Internal Constructions: Valuation, Reclassification, Impact on Ratios and Cash Flows

In-house constructions represent assets built within the company with the labour force carrying out its activities. Such assets are tangible multi-year assets and, therefore, like all tangible multi-year assets, are depreciable according to the standard depreciation rules. In-house constructions pose problems at the valuation level as, at times, errors can note in the allocation of costs. In addition, there are logical errors in the reclassification of internal constructions within the reclassified balance sheet and the calculation of cash flows. These issues will be discussed in more detail in the following pages, highlighting the most frequent errors and the most appropriate solutions