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Wiley GAAP 2013: Interpretation and Application of Generally Accepted Accounting Principles by Joanne M. Flood

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2. A sale of stock, net assets of a business, or a segment of a business which contain real estate except in cases in which an “in-substance” real estate sale occurs.
3. Securities accounted for under ASC 320.

Profit recognition methods

Profit from real estate sales is recognized in full, provided the following:

1. The profit is determinable (i.e., the collectibility of the sales price is reasonably assured or the amount that will not be collectible can be estimated).
2. The earnings process is virtually complete, that is, the seller is not obliged to perform significant activities after the sale to earn the profit.

When both of these conditions are satisfied, the method used to recognize profits on real estate sales is referred to as the full accrual method. If both of these conditions are not satisfied, recognition of all or part of the profit is postponed.

For real estate sales, the collectibility of the sales price is reasonably assured when the buyer has demonstrated a commitment to pay. This commitment is supported by a substantial initial investment, along with continuing investments that give the buyer a sufficient stake in the property such that the risk of loss through default motivates the buyer to honor its obligations to the seller. Collectibility of the sales price is also assessed by examining the conditions surrounding the sale (e.g., credit history of the buyer; age, condition, and location of the property; and history of cash flows generated by the property). ...

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