FROM LAND TO LEGACY: ACCOUNTING FOR CEMETERIES IN LOCAL AUTHORITIES
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by Elles Mukunyadze
It starts with a piece of land. A local authority holds it as part of its property portfolio — sitting quietly on the balance sheet as Property, Plant and Equipment (PPE) under IPSAS 45. Then a decision is made: this land will become a cemetery. Graves will be surveyed, the site developed, and burial rights sold to the public.
Simple enough operationally. But from an accounting perspective, this decision sets off a chain of transactions that many finance teams are not fully prepared for. What standard applies now? How do we measure and allocate costs? When do we recognise revenue? This article walks you through the full accounting journey — from the moment land is reclassified to the day a grave is sold and beyond.
1️⃣ Step One: Reclassify the Land from PPE to Inventory
When the local authority originally held the land for service delivery or administrative purposes, it was correctly classified as PPE under IPSAS 45 (Property, Plant and Equipment). But the moment a decision is made to develop and sell burial rights, the nature of the asset changes fundamentally. It is no longer held for use — it is now held for sale in the ordinary course of operations.
This triggers a reclassification from PPE to Inventory under IPSAS 12 (Inventories). IPSAS 12 applies to assets held for sale in the ordinary course of operations, and cemetery graves being sold to the public fit squarely within this definition.
Land is not depreciated under IPSAS 45 — it has an indefinite useful life. The reclassification is therefore done at the carrying amount of the land at the date of transfer, which equals its original cost less any impairment losses previously recognised.
Journal Entry — Reclassification:
Dr Inventory (Cemetery Land) $XXX
Cr Property, Plant and Equipment $XXX
Note: Once transferred to inventory, IPSAS 12 does not permit depreciation of inventory — consistent with how land was treated under PPE.
2️⃣ Step Two: Capitalise Costs to Develop the Site
Before graves can be sold, the land must be developed. This typically involves surveying and pegging individual plots, installing access roads and pathways, erecting perimeter fencing, putting up signage, and potentially installing water and drainage infrastructure.
All costs directly attributable to bringing the cemetery to a condition ready for sale are capitalised into the inventory balance. This is consistent with IPSAS 12’s measurement principle: inventories shall be measured at cost, which includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition.
Example of development costs:
Survey and pegging of plots: $8,000
Access roads and pathways: $15,000
Perimeter fencing: $12,000
Signage and infrastructure: $5,000
Total development costs: $40,000
Journal Entry — Capitalising development costs:
Dr Inventory (Cemetery Development) $40,000
Cr Cash / Payables $40,000
The total inventory balance now reflects the full cost of the developed cemetery — land plus development costs.
3️⃣ Step Three: Allocate Cost to Individual Graves
Once the total cost of the cemetery is established, it must be allocated to individual graves. This gives each grave a unit cost — which will later become the cost of sales figure when a grave is sold.
The most straightforward and defensible method is a per-unit allocation based on the total number of surveyed graves:
Formula:
Cost per grave = Total inventory cost ÷ Total number of graves
Example:
Total cost of land (at carrying amount): $50,000
Total development costs: $40,000
Total inventory cost: $90,000
Number of graves surveyed: 1,800
Cost per grave: $90,000 ÷ 1,800 = $50 per grave
This unit cost becomes the basis for cost of sales recognition whenever a grave is sold. If grave sizes vary (standard vs. premium plots), a weighted allocation method may be more appropriate to reflect the relative sizes and value of different grave categories.
4️⃣ Step Four: Recognise Revenue and Derecognise Inventory When a Grave Is Sold
Noted — those are important technical corrections. Here is the revised section 4 only:
4️⃣ Step Four: Recognise Revenue and Derecognise Inventory When a Grave Is Sold
When a grave is sold — that is, when burial rights are transferred to a buyer — two things happen simultaneously: revenue is recognised, and the corresponding inventory is derecognised into cost of sales.
Revenue recognition follows IPSAS 47 (Revenue), which Zimbabwe has early adopted. Under IPSAS 47, revenue from the sale of burial rights is treated as revenue from a transaction with a binding arrangement — the entity has a compliance obligation to transfer the right to a specific grave to the buyer in exchange for consideration. Revenue is recognised when the compliance obligation is satisfied, which occurs at the point burial rights are transferred to the buyer and payment is received or receivable.
Example: A grave is sold for $200 (cash):
Journal Entry — Revenue recognition:
Dr Cash $200
Cr Revenue (Sale of Burial Rights) $200
Journal Entry — Cost of sales (derecognition of inventory):
Dr Cost of Sales $50
Cr Inventory (Cemetery Graves) $50
Gross profit on this transaction: $150
Over time, as graves are sold, the inventory balance reduces grave by grave, and the income statement reflects the true economic activity of the cemetery operation.
5️⃣ Step Five: Expense Ongoing Cemetery Maintenance Costs
Not all cemetery-related costs are capitalised. Once the cemetery is operational, the entity will incur ongoing maintenance costs — grass cutting and grounds maintenance, security, general repairs, administration, and utilities.
These costs do not add to the value of unsold graves. They are period costs and must be expensed as incurred in the statement of financial performance. Capitalising maintenance costs into inventory would overstate asset values and distort the cost per grave — which is a common error in practice.
Journal Entry — Maintenance costs:
Dr Cemetery Maintenance Expense $X,XXX
Cr Cash / Payables $X,XXX
The key distinction to always apply: Does this cost bring a new asset to its current condition for sale? → Capitalise. Does it simply maintain what already exists? → Expense.
Wrap-Up
What begins as a straightforward land holding becomes a multi-standard accounting exercise the moment a cemetery decision is made. The journey looks like this:
Land reclassified from PPE (IPSAS 45) → Inventory (IPSAS 12)
Development costs capitalised into inventory
Total cost allocated per grave to establish unit cost
On sale: revenue recognised under IPSAS 47 and inventory derecognised to cost of sales
Ongoing maintenance costs expensed as incurred
Getting this right matters — not just for compliance, but for accurate pricing decisions, transparent financial reporting, and accountability to the communities local authorities serve. If your entity is sitting on land earmarked for cemetery development, now is the time to ensure your finance team understands the full accounting picture before the first grave is pegged.
