Accounting for Real Estate Transactions

Transcription

1 Accounting for Real Estate Transactions A Guide for Public Accountants and Corporate Financial Professionals Second Edition MARIA K. DAVIS WILEY John Wiley & Sons, Inc.

2 Contents Preface About the Author List of Abbreviations xiii xv xvii PART 1 ACCOUNTING FOR REAL ESTATE TRANSACTIONS GENERAL 1 Chapter 1: Acquisition, Development, and Construction of Real Estate Overview Acquisition, Development, and Construction Costs Preacquisition Costs Project Costs Cost Allocation Change in Estimates or Project Plans and Abandonments of Projects Costs Incurred to Sell or Rent a Real Estate Project Costs Incurred to Sell a Real Estate Project Costs Incurred to Rent a Real Estate Project Incidental Operations Accounting for Costs Incurred Subsequent to Project Completion Determining the Date of Project Completion Costs Incurred Subsequent to Project Completion Purchase of Income-Producing Property Purchase of a Business Purchase of an Asset/Asset Group Recognition of Intangible Assets Acquired Measurement of Property, Plant, Equipment, and Intangibles Allocation of Acquisition Cost Accounting for Intangibles Subsequent to Acquisition Key Differences: Business versus Asset Acquisitions Special Accounting Issues Costs of Amenities Start-up Costs Land Options Financing as Part of a Purchase Transaction Environmental Costs and Liabilities Transactions with Related Parties 54 VII

3 D Contents 1.8. Financial Statement Presentation and Disclosure Cash Flow Statement Presentation Segment Disclosures for Public Companies Other Presentation and Disclosure Requirements International Financial Reporting Standards I AS 16, Property, Plant and Equipment IAS 40, Investment Property IFRS 3, Business Combinations Synopsis of Authoritative Literature (Pre-Codification References) 72 Chapter 2: Nonmonetary Exchanges of Real Estate Overview Section 1031 Exchange Nonmonetary Exchanges Not Governed by Topic 845 (APB Opinion No. 29) Exchange with Continuing Involvement of the Transferor In-Substance Sale and Purchase Transaction Nonmonetary Exchange Involving Business Involuntary Conversion Accounting for Nonmonetary Exchanges General Principle Fair Value Exceptions to the Fair Value Principle Nonmonetary Exchange of Real Estate Involving Monetary Consideration Accounting by Receiver of Monetary Consideration Accounting by Payer of Monetary Consideration Special Accounting Issues Exchange-Leaseback Transactions between Related Parties Financial Statement Presentation and Disclosure International Financial Reporting Standards Commercial Substance of Exchange Transaction Fair Value Measurement Synopsis of Authoritative Literature (Pre-Codification References) 101 Chapter 3: Real Estate Sales Overview Applicability of the Real Estate Sale Guidance Sale and Profit Recognition Sale of Real Estate with Long Construction Periods Profit Recognition under the Accrual Method General Rule Specific Criteria Failure to Meet Criteria for the Application of the Accrual Method Inadequate Initial Investment Inadequate Continuing Investment Receivable Subject to Future Subordination Continuing Involvement Application of Other Accounting Methods Deposit Method Installment Method 146

4 Contents a ix Cost Recovery Method Reduced Profit Method Percentage-of-Completion Method Financing Method Leasing Method Profit-Sharing Method Performance-of-Services Method Special Accounting Issues Impairment and Loss on Sale Extinguishment of Debt with the Sale of Property Wrap-around Mortgage Effect of Nonrecourse Financing on Profit Recognition Financial Statement Presentation and Disclosure Presentation of Gain on Sale of Land Option Presentation of Properties as Held for Sale Discontinued Operations Presentation Disclosures upon Recognition of Impairment Loss Cash Flow Statement Presentation International Financial Reporting Standards IAS 18, Revenue IAS 11, Construction Contracts IFRIC 15, Agreements for the Construction of Real Estate Synopsis of Authoritative Literature (Pre-Codification References) 182 Chapter 4: Real Estate Leases Overview Definition of a Lease Right to Use Specified Property, Plant, or Equipment Stated Period of Time Reassessment of the Arrangement Lease Classification General Lease Classification Lessee Lease Classification Lessor Lease Classification Criteria Lease Classification Leases Involving Real Estate Leases Involving Land Only Leases Involving Land and Building Leases Involving Equipment as Well as Real Estate Leases Involving Part of a Building Accounting for Leases Accounting for Leases Lessee Accounting for Leases Lessor Special Accounting Issues Extensions and Renewals of a Lease Modifications to the Provisions of a Lease Lease Termination Purchase and Sale of Leased Asset before the End of the Lease Term. 230

5 D Contents Rent Holiday and Scheduled Rent Increases/Decreases Contingent Rentals Lease Incentives in Operating Leases Subleases and Lease Substitutions Leases and Leasehold Improvements Acquired in a Business Combination Impairment of Assets under Lease and Losses on Leasing Activities Build-to-Suit Leases Leases between Related Parties Financial Statement Presentation and Disclosure Presentation and Disclosure Lessee 250 " Presentation and Disclosure Lessor International Financial Reporting Standards Lease Classification Accounting and Disclosures Lessee Accounting and Disclosures Lessor Synopsis of Authoritative Literature (Pre-Codification References) 258 Chapter 5: Sale-Leaseback of Real Estate Overview Accounting for Sale-Leaseback Transactions Involving Real Estate Accounting by the Seller-Lessee Accounting by the Buyer-Lessor Specific Accounting Issues Unusual Terms of Sale-Leaseback Transactions Impairment of Property Minor Subleases Sale of a Partial Interest Leasebackof a Portion of the Property Sold Sale-Leaseback of Multiple Assets Contribution-Leaseback Transactions Wrap Lease Transactions Leaseback with Fixed-Price Renewal Options for Substantially All of the Property's Economic Life Sale-Leaseback Transactions by Regulated Enterprises Sale-Leaseback Involving Related Parties Financial Statement Presentation and Disclosure International Financial Reporting Standards Synopsis of Authoritative Literature (Pre-Codification References) 305 PART 2 ACCOUNTING FOR REAL ESTATE INDUSTRY-SPECIFIC TRANSACTIONS 311 Chapter 6: Interests in Real Estate Ventures Overview Methods of Accounting for Interests in Real Estate Ventures Consolidation Equity Method of Accounting 333

6 Contents a xi Pro Rata Consolidation Cost Method Change between the Cost and Equity Method of Accounting Measuring Interests in Real Estate Ventures at Fair Value Accounting for Transactions with a Real Estate Venture Capital Contributions Loans and Advances to a Venture Sales of Real Estate Service Arrangements Sale of Interest in Real Estate Venture Special Accounting Issues Related to Consolidation Noncontrolling Interest Special Considerations Real Estate Entities Special Accounting Issues Related to the Equity Method of Accounting Other than Common Stock Investments in Corporate Ventures Differences between Accounting Principles of Investor and Venture Recognition of Losses by the Investor Investments in an Investee after Suspension of Loss Recognition Cash Distributions in Excess of Investment Hypothetical Liquidation at Book Value Method Impairment Interest Capitalization Financial Statement Presentation and Disclosure Consolidated Investments -, Equity Method Investees ' Items Measured at Fair Value International Financial Reporting Standards Investments in Subsidiaries Interests in Joint Ventures Investments in Associates Synopsis of Authoritative Literature (Pre-Codification References) 380 Chapter 7: Time-Sharing Transactions Overview Types of Time-Sharing Arrangements Deeded Structures Accounting for the Sale of Time-Sharing Intervals Application of the Accrual and Percentage-of-Completion Methods Accounting for Costs to Sell Time-Sharing Intervals Special Accounting Issues Uncollectibility of Receivables Incentives and Inducements Incidental Operations Upgrade and Reload Transactions Seller Support of Operations Division of Project into Phases Financial Statement Presentation and Disclosure Synopsis of Authoritative Literature (Pre-Codification References) 419

7 xii Contents Chapter 8: Retail Land Sales Overview Accounting for Retail Land Sales Revenue Recognition Profit Recognition Special Accounting Issues Change from the Installment to the Percentage-of-, Completion Method Accounting for Repossessed Land Financial Statement Presentation and Disclosure Synopsis of Accounting Literature (Pre-Codification References) 434 Glossary 435 Index 455