November 2019
Beginner
208 pages
4h 52m
English
Content preview from Real Estate Accounting Made Easy, 2nd Edition
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15REAL ESTATE DEVELOPMENT REVENUE RECOGNITIONS
Prior to FASB issuance of Topic 606, Revenue from Contracts with Customers, there were various methods developers used to recognize revenue on real estate projects, such as the full accrual method, percentage of completion method, deposit method, installment method, reduced-profit method, and cost recovery method. Under previous accounting standards the method used was dependent on the nature of the transaction. Hence for most entities, effective for annual reporting periods beginning after December 15, 2016, the FASB issued Topic 606 aimed at converging revenue recognition among U.S. companies under Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
Because previous revenue recognition guidance in the U.S. combined broad revenue recognition concepts together with numerous revenue requirements for various industries, economically similar transactions in some cases were accounted for differently. Topic 606 corrected this inconsistency.
Regardless of whether a real estate developer sells units in a condominium project or an investor sales office or apartment building, the current accounting guidance requires using the same standard in determining when and how much revenue should be recognized. Topic 606 hence ensures consistency in revenue recognition across all industries and transactions.
REQUIREMENTS FOR REVENUE RECOGNITION
Topic 606 is the current primary accounting guidance ...
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