Capital work in progress
The account holding a project’s accumulated cost during construction, before the completed asset is transferred to property, plant and equipment and depreciation begins.
While an asset is being built its cost accumulates as capital work in progress: recognised on the balance sheet but not yet depreciated, because depreciation begins when the asset is available for use. Under IPSAS 45 that means when it is in the location and condition necessary for it to be capable of operating in the manner management intended, which is a test about the asset, not about the paperwork.
The transfer out of work in progress is where the project and the accounts meet. The accumulated cost must be split into the assets and components that will each be depreciated over their own lives, and that split can only follow whatever structure the project’s cost records support. A project that captured cost by contract rather than by asset hands the accountant a total that cannot be decomposed, and the register starts life as one undifferentiated line.
The same term, through four lenses
01
Project
the delivery team and the contract
To the project, work in progress is invisible. What the project produces is a stream of certified payments against a cost breakdown, and where those land in the accounts is somebody else’s concern.
The consequence is that the structure of the eventual transfer is being fixed, irreversibly, by a decision nobody is treating as an accounting decision: whether cost is captured against contracts or against assets.
Fixed by
FIDIC Conditions of Contract, 2017 edition, Clause 14 on interim payment certificates, which fix what cost is recorded against.
Recorded in
The cost report and the payment certificates.
02
Engineering
design, commissioning and the technical record
Engineering holds the evidence for the test finance has to satisfy, and does not know it is holding it. Capability to operate as management intended is established by commissioning: measured performance against the stated requirements, with dates.
The commissioning file is therefore the natural evidence for the capitalisation date. It is produced for a different audience, filed with the technical records, and on most projects finance never sees it.
Fixed by
The commissioning plan and the tests on completion under FIDIC Sub-Clause 9.1, with the results forming the record of measured performance.
Recorded in
The commissioning file and the test records.
03
Finance
the accounts and the fixed asset register
Work in progress is the account holding accumulated cost before an asset exists to depreciate. Recognised on the balance sheet, not yet depreciated, because depreciation begins when the asset is available for use.
Two things have to happen to empty it, and only the first is usually planned. The date must be determined on the capability test, and the accumulated cost must be split into the assets and components that will each be depreciated over their own lives. The second is only possible if the cost records support the split, which is decided long before anyone asks.
Fixed by
IPSAS 45, application guidance AG27 for when depreciation begins, and paragraphs 41 to 43 for the separate depreciation of significant parts that the transfer must produce.
Read the sources
- IPSAS 45, property, plant and equipment2023, effective 1 January 2025; read 2026-09-01.Free in full, with its Basis for Conclusions in the same document. Replaced IPSAS 17 from 1 January 2025.
Recorded in
The capital work in progress account, and the transfer journal.
04
Operations
the people who run and maintain it
Operations meets this account only when something has gone wrong with it. An asset that is in service but still sitting in work in progress is undepreciated, invisible in the renewal profile, and often absent from the technical register too, because the same handover that would have created its records never completed.
The failure mode is quiet and it is common on programmes taken over in sections: the project closed, nobody owned the reclassification, and the asset is being operated by people whose systems do not list it.
Fixed by
ISO 55001:2024, Clause 7.6, data and information. An asset stranded in work in progress has no asset record for the technical record to be traced to.
Read the sources
- ISO 55001:2024, asset management system requirements2024 edition; read 2026-09-26.ISO’s product page: the publication details and ISO’s own summary of the standard, not the requirement text. The contents, foreword and introduction cited in this publication are taken from the standard’s preview pages hosted on the ANSI webstore, not from this page.
Recorded in
Nowhere, which is the point.
Where the lenses part
Finance against Engineering
Finance must answer a capability question and reaches for a certificate; engineering holds the measurements that actually answer it. The commissioning file tests the asset against the owner’s stated requirements, with dates and readings, which is precisely what "capable of operating in the manner management intended" asks for. The two documents sit in different systems with different owners, and on most projects the accounting judgement is made without the better evidence ever being requested.
Project against Finance
The transfer out of work in progress requires cost decomposed by asset and component. The project recorded it by contract and package, because that is what it was paying against. Neither party made an error, and the requirement only becomes visible at the moment the records that could have satisfied it are closed. This is why registers so often begin life as one undifferentiated line.
What has to agree, and how you would know
| The datum | Held by | The test |
|---|---|---|
| The date depreciation begins | Finance, Engineering | Ask what evidence supports the capitalisation date. If the answer is a certificate, ask what in that certificate tests capability to operate. Then ask whether the commissioning completion date was considered and, if it differs, why the other date was preferred. |
| The split of accumulated cost | Project, Finance | Take the transfer journal and trace one component’s cost back to source records. An apportionment is acceptable and common; what matters is whether it is recorded as one, since it sets a depreciation charge that will run for decades. |
| What is still sitting in the account | Finance, Operations | List everything remaining in work in progress and ask, for each, whether it is in service. Anything in service and still in the account is undepreciated, and probably missing from the technical register as well. |
Sources
IPSAS 45, Property, Plant, and Equipment: depreciation of an asset begins when it is available for use, meaning when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
Read the sources
- IPSAS 45, property, plant and equipment2023, effective 1 January 2025; read 2026-09-01.Free in full, with its Basis for Conclusions in the same document. Replaced IPSAS 17 from 1 January 2025.