Payments are generally capitalized if they relate to an option to obtain the real property or if all of the following conditions are met:
Costs are directly identified with the property.
Costs would be capitalized if the property already were acquired.
Acquisition of the option or property is probable. The purchaser wants the property and believes it to be available for sale and has the ability to finance its acquisition.
Once capitalized, these costs are project costs which, if not receivable in the future, or if the property is not acquired are to be recognized as expense.
Real estate taxes and insurance are capitalized as property costs only when the property is undergoing activities necessary to get the property ready for its intended use. After the property is substantially complete and ready for its intended use such items are expensed.
Costs that are identifiable and clearly associated with acquisition, development, and construction of a real estate project are capitalized as a cost of the project.
Indirect costs that relate to several projects are capitalized and allocated to these projects. Overhead costs that do not clearly relate to any project (i.e., general and administrative expenses) are expensed as incurred.
The costs in excess of anticipated proceeds of amenities that are to be sold or transferred in connection with the sale of individual units are treated as common ...