O'Reilly logo

Accounting for Real Estate Transactions: A Guide For Public Accountants and Corporate Financial Professionals, 2nd Edition by Maria K. Davis

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 3

Real Estate Sales

3.1 Overview

Premature profit recognition on real estate sales transactions had been an issue for many years when, in 1962, the Securities and Exchange Commission (SEC) provided examples of real estate transactions for which it would be inappropriate to recognize profit at the time of sale. In subsequent years, real estate transactions became increasingly innovative and complex, and their legal form did frequently not reflect the substance of the transaction. These developments prompted the American Institute of Certified Public Accountants (AICPA) to establish the Committee on Accounting for Real Estate Transactions in 1971. The committee was formed to study and evaluate revenue and profit recognition applied in practice and to recommend changes. As a result of the committee's recommendations, the AICPA Industry Accounting Guide, Accounting for Profit Recognition on Sales of Real Estate, was issued in 1979. Financial Accounting Standards Board (FASB) Statement No. 66, Accounting for Sales of Real Estate, extracted the principles from that Accounting Guide and from the guidance in the two Statements of Position (SOP) No. 75-6, Questions Concerning Profit Recognition on Sales of Real Estate, and SOP 78-4, Application of the Deposit, Installment, and Cost Recovery Methods in Accounting for Sales of Real Estate. The real estate sale guidance has been codified in Subtopic 360-20, Property, Plant, and Equipment—Real Estate Sales, which addresses the sale ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required