ASC 330-978
Real Estate—Time-Sharing Activities
330 Inventory
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ASC 330-978 governs how time-share sellers measure time-sharing inventory (intervals) and cost of sales. Sellers must use the relative sales value method, applied phase by phase, with common costs (including amenities) allocated among benefited phases, and must recalculate total estimated time-sharing revenue and total costs at least quarterly. Changes in estimate are recorded as current-period adjustments, and rental/other activity during the holding period is treated as incidental operations that reduce the pool of inventory costs.
Key points (7)
- Sellers of time-sharing intervals account for cost of sales and inventory using the relative sales value method, applied separately to each phase, with common costs such as amenities allocated among the phases they benefit (330-978-30-1).
- At least quarterly—even if no quarterly SEC reports are filed—total time-sharing revenue (actual to-date plus expected future) and total cost estimates must be recalculated, incorporating uncollectibles, price/mix changes, repossessions, upgrade programs, and sales incentives; the cost-of-sales percentage is recomputed each time (330-978-35-1).
- Effects of changes in estimate are accounted for as a current-period adjustment so that the ending balance sheet and subsequent accounting are as if the revised estimates had been the original ones, with disclosure under 250-10-50-4 (330-978-35-1).
- An adjustment for expected uncollectibles carries a corresponding adjustment to cost of sales and inventory via the cost-of-sales percentage; repossession or reacquisition of an interval has no inventory effect unless it changes expected uncollectibles (330-978-35-2).
- Inventory must still be tested for impairment under 360-10-35-38 through 35-40, 360-10-35-43, and 360-10-40-5 (330-978-35-2).
- Rental and other operations during holding periods are incidental operations: incremental revenue exceeding incremental cost reduces the pool of inventory costs (and is not projected into the relative sales value calculation), while incremental cost exceeding revenue is expensed as incurred (330-978-35-3).
- During holding periods—beginning when intervals are held for and available for sale (e.g., legally registered as time-shares)—intervals are inventory and are not depreciated; rental activity outside the holding period requires depreciation and lessor accounting under Subtopic 842-30 (330-978-35-4 through 35-6).
For students. This is a niche, industry-specific measurement model: the relative sales value method links inventory relief directly to revenue estimates, so a change in expected uncollectibles automatically changes cost of sales and inventory. A common misunderstanding is thinking a repossessed interval goes back into inventory—it does not, unless the repossession changes the estimate of uncollectibles.
relative sales value methodtime-sharing intervalcost-of-sales percentageincidental operationsholding periodchange in estimateexpected uncollectiblesinventory impairment
Machine-generated study aid for ASC 330-978. Check the source paragraphs below.
330-978-00Status
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330-978-00-1
The following table identifies the changes made to this Subtopic.
330-978-05Overview and Background
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330-978-05-1
This Subtopic addresses real estate time-sharing inventory measurement issues. Time-sharing inventory consists of time-sharing interests or intervals.
330-978-15Scope and Scope Exceptions
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Overall Guidance
330-978-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 978-10-15, with specific transaction exceptions noted below.
330-978-15-2
See paragraph 978-810-25-3 for guidance concerning when an entity shall recognize its interests in a special-purpose entity as inventory.
Transactions
330-978-15-3
The guidance in this Subtopic applies to the following transactions and activities:
- aAll time-sharing sale transactions that are within the scope of Topic 606 on revenue from contracts with customers.
330-978-15-4
The guidance in this Subtopic does not apply to the following transactions and activities:
- aTime-sharing transactions transactions that fail to meet all of the criteria in paragraph 606-10-25-1 and, therefore, are accounted for in accordance with paragraphs .
330-978-30Initial Measurement
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Accounting for Cost of Sales and Time-Sharing Inventory
330-978-30-1
Sellers of time-sharing intervals shall account for cost of sales and time-sharing inventory using the relative sales value method. The relative sales value method shall be applied to each phase separately. Common costs, including amenities, shall be allocated to inventory among the phases that those costs will benefit.
330-978-30-3
See paragraph 978-330-35-1 for additional guidance related to the determination of total time-sharing revenue and total cost estimates.
330-978-35Subsequent Measurement
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Accounting for Cost of Sales and Time-Sharing Inventory
330-978-35-1
At least quarterly, both total time-sharing revenue (actual to-date plus expected future revenue) and total cost estimates shall be recalculated. A time-sharing entity shall adjust at least quarterly even if it does not issue quarterly financial reports under Securities and Exchange Commission (SEC) reporting requirements. The estimate of total time-sharing revenue (actual to-date plus expected future revenue) for use in the relative sales value method shall incorporate factors such as incurred or estimated uncollectibles, changes in sales prices or sales mix, repossession of intervals that the seller may or may not be able to resell, effects of upgrade programs, and past or expected sales incentives to sell slow-moving inventory units. Such amounts should be included in the estimate of total time-sharing revenue for use in the relative sales value method even when those amounts are recognized as bad-debt expense within the statement of comprehensive income rather than included within the revenue recognized. The cost-of-sales percentage shall be similarly recalculated each time estimated revenue (including amounts reported or expected to be reported as revenue or as bad-debt expense) or cost is adjusted, using the new estimate of total time-sharing revenue and total cost (including costs to complete, if any). The effects of changes in estimate for cost shall be accounted for in each period using a current-period adjustment, that is, the time-share seller shall account for a change in estimate in the period of change so that the balance sheet at the end of the period of change and the accounting in subsequent periods are as they would have been if the revised estimates had been the original estimates. The effects of changes in estimate shall be disclosed in accordance with paragraph 250-10-50-4. The inventory balance reported in the balance sheet, plus estimated costs to complete that inventory, if any, represents a pool of costs that will be charged against future revenue.
330-978-35-2
The recording of an adjustment for expected uncollectibles is accompanied by a corresponding adjustment to cost of sales and inventory that is effected through the application of the cost-of-sales percentage. However, under the relative sales value method, there is no accounting effect on inventory if a time-sharing interval is repossessed or otherwise reacquired unless the repossession causes a change in expected uncollectibles. The seller shall, however, perform impairment testing on its inventory in accordance with paragraphs , 360-10-35-43, and 360-10-40-5.
330-978-35-3
Revenue from and costs of rental and other operations during holding periods shall be accounted for as incidental operations. Incremental revenue from incidental operations in excess of incremental costs from incidental operations shall be accounted for as a reduction of inventory costs—that is, the pool of inventory costs under the relative sales value method as described in paragraph 978-330-35-1. Estimates of future amounts of such excess should not be factored into the calculations of the relative sales value method. Incremental costs in excess of incremental revenue should be charged to expense as incurred.
Operations during Holding Periods
330-978-35-4
Holding period operations include sampler programs and mini-vacations. During holding periods, time-sharing intervals shall be accounted for as inventory and shall not be depreciated. Costs of operations during holding periods include seller subsidies and maintenance and related costs on time-sharing intervals held for sale.
330-978-35-5
For time-sharing operations, the holding period (as that term is used in the definition of incidental operations) begins at the time that intervals are held for and are available for sale—for example, when units in domestic locations are legally registered for sale as time-shares. A seller shall evaluate each period as to whether units previously considered held for and available for sale shall continue to be characterized as such.
330-978-35-6
If rental activities occur other than during the holding period, the corresponding units shall be depreciated and those activities shall be accounted for as rental operations in accordance with Subtopic 842-30 on leases—lessors.
330-978-50Disclosure
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330-978-50-1
See paragraph 978-330-35-1 for disclosure requirements for changes in estimates used to perform the relative sales value method.
Related subtopics
- 340-978 Real Estate—Time-Sharing ActivitiesOther Assets and Deferred Costs
- 978-10 OverallReal Estate—Time-Sharing Activities
- 310-978 Real Estate—Time-Sharing ActivitiesReceivables
- 720-978 Real Estate—Time-Sharing ActivitiesOther Expenses
- 810-978 Real Estate—Time-Sharing ActivitiesConsolidation
- 840-978 Real Estate—Time-Sharing ActivitiesLeases