Question

FASB ASC 5-3 Real Estate.

Several FASB Statement deal with accounting for real estate sales. Search the FASB ASC database to determine under what conditions profit from real estate sales can be recognized. Cut and paste your findings, and then write a summary of what you found.  

Financial Accounting Theory And Analysis Text and Cases 12th Edition.  

Answer 1

This Statement establishes accounting standards for recognizing profit or loss on sales of real estate. It adopts the specialized profit recognition principles in the AICPA Industry Accounting Guides, Accounting for Profit Recognition on Sales of Real Estate and Accounting for Retail Land Sales; and AICPA Statements of Position 75-6, Questions Concerning Profit Recognition on Sales of Real Estate,and 78-4, Application of the Deposit, Installment, and Cost Recovery Methods in Accounting for Sales of Real Estate.

For retail land sales, this Statement requires that the seller's receivables from the land sales be collectible and that the seller have no significant remaining obligations for construction or development before profits are recognized by the full accrual method. Other sales in retail land sales projects are to be reported under either the percentage-of-completion or the installment method, for which the Statement establishes criteria based on the collectibility of the seller's receivables from the land sales and the seller's remaining obligations.

For other sales of real estate, this Statement provides for profit recognition by the full accrual and several other methods, depending on whether a sale has been consummated, the extent of the buyer's investment in the property being sold, whether the seller's receivable is subject to future subordination, and the degree of the seller's continuing involvement with the property after the sale. Paragraphs 3-5 set forth the general requirements for recognition of all the profit at the date of sale. Paragraphs 6-18 elaborate on those general rules. Paragraphs 19-43 provide more detailed guidance for a variety of more complicated circumstances if the criteria for immediate profit recognition are not met.

Certain provisions of this Statement that relate to accounting for sales of real estate are summarized in decision trees.