# ASC 323-974: Investments—Equity Method and Joint Ventures — Real Estate—Real Estate Investment Trusts Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/323/974/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:43:04.021Z to 2026-09-09T23:43:16.668Z Record version: sha256:3f80644b426c891dac619c175e2e7dd73c33300bfa05df09d74961417329d8f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-974: Investments—Equity Method and Joint Ventures — Real Estate—Real Estate Investment Trusts ### Machine-generated study aids ```json { "summary": "This Subtopic tells a REIT how to account for its investment in a \"service corporation\" — an affiliated entity, typically holding non-qualifying REIT activities, whose voting stock is largely held by others. Even without a voting majority, listed factors (activities performed primarily for the REIT, economic benefits flowing to the REIT, common board members/officers, nominal outside equity, management influence, access to financial information) indicate the REIT has at least significant influence, requiring the equity method or consolidation based on facts and circumstances (323-974-25-1). Service corporations that are variable interest entities are excluded and are instead evaluated under the VIE Subsections of Section 810-10.", "key_points": [ "The Subtopic addresses recognition and measurement for REIT investments, including accounting for related service corporations (323-974-05-1).", "Scope follows Section 974-10-15 and covers only service corporations that are not variable interest entities (323-974-15-2); service corporations that are VIEs are scoped out and evaluated under the Variable Interest Entities Subsections of Section 810-10 (323-974-15-3).", "Presence of some or all of eight enumerated factors indicates the REIT has the ability to exercise at least significant influence over the service corporation, so the REIT must apply the equity method or consolidate (323-974-25-1).", "Indicative factors include: the service corporation performs activities primarily for the REIT; substantially all economic benefits flow to the REIT; the REIT can designate a board seat; common board members, officers, or employees (323-974-25-1(a)–(e)).", "Additional factors include: majority voting stockholders of the service corporation have not contributed substantial equity; REIT management's views influence operations; and the REIT can obtain the financial information needed to apply the equity method (323-974-25-1(f)–(h)).", "The choice between equity method and consolidation is a facts-and-circumstances determination, not a bright-line voting-percentage test (323-974-25-1)." ], "categories": [ "Recognition", "Consolidation", "Industry-specific", "Subsequent measurement" ], "audience_level": "intermediate", "student_note": "Classic trap: students assume that because a REIT holds only nonvoting or minority stock in a service corporation, cost or fair value accounting applies — but the listed influence indicators usually force equity method or consolidation. Always check first whether the service corporation is a VIE, because if it is, this Subtopic does not apply and ASC 810-10's VIE model governs.", "related_topics": [ "323-10", "810-10", "974-10", "974-810", "325-20" ], "key_concepts": [ "real estate investment trust", "service corporation", "significant influence", "equity method", "consolidation", "variable interest entity", "nominal outside equity", "facts and circumstances assessment" ] } ``` Source downloaded (UTC): 2026-09-09T23:43:04.021Z to 2026-09-09T23:43:04.021Z Record version: sha256:43e3a49b69d44fe4f1e6ad579f203c5926cce14a0408c1128abf1f754701ca86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-974-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/323/974/#00-status) SEC content: no ##### [323-974-00-1](https://asc.understandingaccounting.org/asc/323/974/#323-974-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:04.021Z to 2026-09-09T23:43:04.021Z Record version: sha256:8df941d5a16000ab7f1d63af6950ea2279c8013f1e326a83c9af00c76cff92ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
974-323-25-1AmendedAccounting Standards Update No. 2016-0101/05/2016
Source downloaded (UTC): 2026-09-09T23:43:05.989Z to 2026-09-09T23:43:05.989Z Record version: sha256:c4e3bcfff7013f825dfc1c35850054d7facf93217cdfc3985e3868b208a019b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-974-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/323/974/#05-overview-and-background) SEC content: no ##### [323-974-05-1](https://asc.understandingaccounting.org/asc/323/974/#323-974-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:05.989Z to 2026-09-09T23:43:05.989Z Record version: sha256:f966bad98df07d23ad42b3d60ca3d1b888acd3b449a1820ad7707e18af4f6efb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses recognition and measurement issues for investments of [real estate investment trusts](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income)."), including the accounting for related [service corporations](https://asc.understandingaccounting.org/glossary/s/#service-corporation "A real estate investment trust may establish a service corporation to perform services for the real estate investment trust or for third parties. Service corporations may provide property management and leasing services, as well as services to acquire, develop, construct, finance, or sell real estate projects."). Source downloaded (UTC): 2026-09-09T23:43:09.662Z to 2026-09-09T23:43:09.662Z Record version: sha256:6b700f505d2d903df84ddc73fd01b853ae7e11f5656a09bb3fb5b64d5b3502f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-974-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/323/974/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [323-974-15-1](https://asc.understandingaccounting.org/asc/323/974/#323-974-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:09.662Z to 2026-09-09T23:43:09.662Z Record version: sha256:9bbc232d992fb54706ddb3bfa4065c855e322f1f3c4cd69f045c467b1cd6d420 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 974-10-15, with specific exceptions noted below. #### Entities ##### [323-974-15-2](https://asc.understandingaccounting.org/asc/323/974/#323-974-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:09.662Z to 2026-09-09T23:43:09.662Z Record version: sha256:9f9b89568c81f9bb61b9fee90ed092e66fc2149461e1a887851610e3879de1d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following entities: 1. a [Service corporations](https://asc.understandingaccounting.org/glossary/s/#service-corporation "A real estate investment trust may establish a service corporation to perform services for the real estate investment trust or for third parties. Service corporations may provide property management and leasing services, as well as services to acquire, develop, construct, finance, or sell real estate projects.") that are not variable interest entities (VIEs). ##### [323-974-15-3](https://asc.understandingaccounting.org/asc/323/974/#323-974-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:09.662Z to 2026-09-09T23:43:09.662Z Record version: sha256:233511c07f654fafb5942b1d3115c8b4b808715f6d4e6ea1a120cb992d7732f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following entities: 1. a Service corporations that are VIEs (see the Variable Interest Entities Subsections of Section 810-10). Source downloaded (UTC): 2026-09-09T23:43:16.668Z to 2026-09-09T23:43:16.668Z Record version: sha256:4c44679788d7eb0aab3ab0bc7ddda1a861ea4c9f578515a9e514a749e4a20eb5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 323-974-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/323/974/#25-recognition) SEC content: no #### Service Corporations ##### [323-974-25-1](https://asc.understandingaccounting.org/asc/323/974/#323-974-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:16.668Z to 2026-09-09T23:43:16.668Z Record version: sha256:09c0db7606321c0174f61e412713d9034d5e1d9637522ba9b3af529835a52f54 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The existence of some or all of the following factors indicates that the [real estate investment trust](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income).") has the ability to exercise at least significant influence over the [service corporation](https://asc.understandingaccounting.org/glossary/s/#service-corporation "A real estate investment trust may establish a service corporation to perform services for the real estate investment trust or for third parties. Service corporations may provide property management and leasing services, as well as services to acquire, develop, construct, finance, or sell real estate projects.") and that, accordingly, the real estate investment trust should either account for its investment under the equity method or should consolidate the investee. 1. a The service corporation performs activities primarily for the real estate investment trust. 2. b Substantially all of the economic benefits in the service corporation flow to the real estate investment trust. 3. c The real estate investment trust has the ability to designate a seat on the board of directors of the service corporation. 4. d The real estate investment trust and the service corporation have common board members. 5. e The real estate investment trust and the service corporation have common officers, employees, or both. 6. f The owners of the majority voting stock of the service corporation have not contributed substantial equity to the service corporation. 7. g The views of the real estate investment's management influence the operations of the service corporation. 8. h The real estate investment trust is able to obtain financial information from the service corporation that is needed to apply the equity method of accounting to its investment in the service corporation. The determination of whether the real estate investment trust should use the equity method of accounting for its investment in the service corporation or consolidate the service corporation in its financial statements should be based on facts and circumstances. ##### [323-974-25-2](https://asc.understandingaccounting.org/asc/323/974/#323-974-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:43:16.668Z to 2026-09-09T23:43:16.668Z Record version: sha256:1afba76c00720cfcc9c032ed769736e1e94fba617059a3741a06baaf6afa3062 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/).