{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/330/978/#35-subsequent-measurement","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"330","topic_title":"Inventory","subtopic":"330-978","subtopic_title":"Real Estate—Time-Sharing Activities","section":{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":"Accounting for Cost of Sales and Time-Sharing Inventory","paragraphs":[{"citation":"330-978-35-1","para":"35-1","html":" 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. 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. 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. 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. 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. 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.