# ASC 340-970-25: Other Assets and Deferred Costs — Real Estate—General — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/340/970/#25-recognition) 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): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:afc7245d7cf447f02f9d8e6ea1b807f43794fba2afdf4947a5d3fde2329eeb0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-970-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/970/#25-recognition) SEC content: no ### Real Estate Project Costs #### Acquisition, Development, and Construction Costs ##### [340-970-25-1](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:a73c81e565f28c82ba8edb01d39f149e1e33cd1539fdef7af6c0712a8519eac1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection does not address the accounting for costs incurred for acquisitions of property that will be used in the entity's own operations, other than for sale or rental. ##### [340-970-25-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:503a86b91fe96e833d56274a4de8d845dc6280ecc32e54fd63c79a3b63ebe340 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [310-20-55-9 through 55-10](https://asc.understandingaccounting.org/asc/310/20/#310-20-55-9) provides guidance on how to distinguish between internal and external costs. The capitalization provisions of this Section for [preacquisition costs](https://asc.understandingaccounting.org/glossary/p/#preacquisition-costs "Costs related to a property that are incurred for the express purpose of, but prior to, obtaining that property. Examples of preacquisition costs may be costs of surveying, zoning or traffic studies, or payments to obtain an option on the property.") apply to internally generated costs. ##### [340-970-25-3](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:924280db85faaea5664ab512626d2ecce62a9f58bc75665cdccebcad85ca668d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Payments to obtain an option to acquire real property shall be capitalized as incurred. All other costs related to a property that are incurred before the entity acquires the property, or before the entity obtains an option to acquire it, shall be capitalized if all of the following conditions are met and otherwise shall be charged to expense as incurred: 1. a The costs are directly identifiable with the specific property. 2. b The costs would be capitalized if the property were already acquired. 3. c Acquisition of the property or of an option to acquire the property is probable (that is, likely to occur). This condition requires that the prospective purchaser is actively seeking to acquire the property and has the ability to finance or obtain financing for the acquisition and that there is no indication that the property is not available for sale. ##### [340-970-25-4](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:bb285e0715be7c32782fd1d538bdd276d63028c31348cfdecd5f8d0701bfd65a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Capitalized preacquisition costs either: 1. a Shall be included as [project costs](https://asc.understandingaccounting.org/glossary/p/#project-costs "Costs clearly associated with the acquisition, development, and construction of a real estate project.") upon the acquisition of the property 2. b To the extent not recoverable by the sale of the options, plans, and so forth, shall be charged to expense when it is probable that the property will not be acquired. ##### [340-970-25-5](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:de02005c07d5f4f02a89f35ed189da58646d81b25c283c9a2f7a4741d49db5de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The view that all internal costs of identifying and acquiring commercial properties should be deferred and, in some manner, capitalized as part of the cost of successful property acquisitions is not appropriate. ##### [340-970-25-6](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:1f8adaf08ad11b1b73296a52610439f97a8a226ec0b03faef1bb66251f629ffe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Internal costs of preacquisition activities incurred in connection with the acquisition of a property that will be classified as nonoperating at the date of acquisition that are directly identifiable with the acquired property and that were incurred subsequent to the time that acquisition of that specific property was considered probable (that is, likely to occur) shall be capitalized as part of the cost of that acquisition. ##### [340-970-25-7](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:62127692fd4404472898d5f85b4fd012251b0f722a82aa8f68ab5d3d994d1c27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [970-340-25-17](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-17) is also applicable in situations in which the acquired property is partially operating and partially nonoperating. ##### [340-970-25-8](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:9f2338c42fe97e70c547397cf64bd377587566480975c6e533295c9ef019b7b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs incurred on real estate for property taxes and insurance shall be capitalized as property cost only during periods in which activities necessary to get the property ready for its intended use are in progress. The phrase _activities necessary to get the property ready for its intended use are in progress_ is used here with the same meaning as it has for interest capitalization in paragraphs [835-20-25-3 through 25-4](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-3) and [835-20-25-8](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-8). Costs incurred for such items after the property is substantially complete and ready for its intended use shall be charged to expense as incurred. The phrase _substantially complete and ready for its intended use_ is used here with the same meaning as it has for interest capitalization in paragraph [835-20-25-5](https://asc.understandingaccounting.org/asc/835/20/#835-20-25-5). ##### [340-970-25-9](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:8507d75e1402e2c945310b831c78c568dffd54ef9342556ec3f170c6922f2831 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accounting for costs of [amenities](https://asc.understandingaccounting.org/glossary/a/#amenities "Features that enhance the attractiveness or perceived value of a time-sharing interval. Examples of amenities include golf courses, utility plants, clubhouses, swimming pools, tennis courts, indoor recreational facilities, and parking facilities. See also Promised Amenities.") shall be based on management's plans for the amenities in accordance with the following: 1. a If an amenity is to be sold or transferred in connection with the sale of individual units, costs in excess of anticipated proceeds shall be allocated as [common costs](https://asc.understandingaccounting.org/glossary/c/#common-costs "Costs that relate to two or more units or phases within a real estate or time-sharing project.") because the amenity is clearly associated with the development and sale of the project. The common costs include expected future operating costs to be borne by the developer until they are assumed by buyers of units in a project. 2. b If an amenity is to be sold separately or retained by the developer, capitalizable costs of the amenity in excess of its estimated fair value as of the expected date of its substantial physical completion shall be allocated as common costs. For the purpose of determining the amount to be capitalized as common costs, the amount of cost previously allocated to the amenity shall not be revised after the amenity is substantially completed and available for use. A later sale of the amenity at more or less than its estimated fair value as of the date of substantial physical completion, less any accumulated depreciation, results in a gain or loss that shall be included in net income in the period in which the sale occurs. ##### [340-970-25-10](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:4f4ceb2a3b07cd0061e1c74a4881d85d3c7337460f7109d080ac51c5be395263 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of amenities shall be allocated among land parcels benefited and for which development is probable. A land parcel may be considered to be an individual lot or unit, an amenity, or a [phase](https://asc.understandingaccounting.org/glossary/p/#phase "A contractually or physically distinguishable portion of a real estate project (including time-sharing projects). That portion is distinguishable from other portions based on shared characteristics such as: Units a developer has declared or legally registered to be for sale Units linked to an owners association Units to be constructed during a particular time period How a developer plans to build the real estate project."). The fair value of a parcel is affected by its physical characteristics, its highest and best use, and the time and cost required for the buyer to make such use of the property considering access, development plans, zoning restrictions, and market absorption factors. ##### [340-970-25-11](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:aa56b9f1d5ff09efd43a5fd703e5bc8af86e94832b229d3549a997cd818d0beb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Before an amenity is substantially completed and available for use, operating income (or loss) of the amenity shall be included as a reduction of (or an addition to) common costs. When an amenity to be sold separately or retained by the developer is substantially completed and available for use, current operating income and expenses of the amenity shall be included in current operating results. ##### [340-970-25-12](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:c2c79f1914cc40bb9c2170edc4c237672865c830ca8cf9df160bb8db01fd0cff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Incremental revenues from incidental operations](https://asc.understandingaccounting.org/glossary/i/#incremental-revenues-from-incidental-operations "Revenues that would not be produced except in relation to the conduct of incidental operations.") in excess of [incremental costs of incidental operations](https://asc.understandingaccounting.org/glossary/i/#incremental-costs-of-incidental-operations "Costs that would not be incurred except in relation to the conduct of incidental operations. Interest, taxes, insurance, security, and similar costs that would be incurred during the development of a real estate project regardless of whether incidental operations were conducted are not incremental costs.") shall be accounted for as a reduction of capitalized project costs. Incremental costs in excess of incremental revenue shall be charged to expense as incurred, because the incidental operations did not achieve the objective of reducing the costs of developing the property for its intended use. #### Costs Incurred to Sell and Rent Real Estate Projects, Including Initial Rental Operations ##### [340-970-25-13](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:46f0f97c1a18250568d58a5a072ef6b13da6df8ad5c3a0c165ba2dde484cc9a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Costs incurred to sell real estate projects](https://asc.understandingaccounting.org/glossary/c/#costs-incurred-to-sell-real-estate-projects "Costs related to the sale of real estate, including the following: Model units and their furnishings Sales facilities Sales brochures Legal fees for preparation of prospectuses Semipermanent signs Advertising Grand openings Sales overhead including sales salaries.") shall be evaluated for capitalization in accordance with paragraphs [340-40-25-1 through 25-8](https://asc.understandingaccounting.org/asc/340/40/#340-40-25-1) . 1. a [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-970-25-14](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:0202132cc321e55ff49000941fd323ad754581e2781a78669ae4590d81be5891 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-970-25-15](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:9f09fa11184bf12a31f076374abeaf8c06258f850d5ee766b74e36b59c0f900d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). ##### [340-970-25-16](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:61e806c06ce7b83b34c2c0b72d247ebdf5aa7cb2b4402372c0c496a66d45fe61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If [costs incurred to rent real estate projects](https://asc.understandingaccounting.org/glossary/c/#costs-incurred-to-rent-real-estate-projects "Costs related to real estate rental activities, including the following: Model units and their furnishings Rental facilities Semipermanent signs Rental brochures Advertising Grand openings Rental overhead including rental salaries."), other than [initial direct costs](https://asc.understandingaccounting.org/glossary/i/#initial-direct-costs "Incremental costs of a lease that would not have been incurred if the lease had not been obtained."), under [operating leases](https://asc.understandingaccounting.org/glossary/o/#operating-lease "From the perspective of a lessee, any lease other than a finance lease. From the perspective of a lessor, any lease other than a sales-type lease or a direct financing lease.") or [direct financing leases](https://asc.understandingaccounting.org/glossary/d/#direct-financing-lease "From the perspective of a lessor, a lease that meets none of the criteria in paragraph 842-10-25-2 but meets the criteria in paragraph 842-10-25-3(b)and is not an operating lease in accordance with paragraph 842-10-25-3A.") are related to and their recovery is reasonably expected from future rental operations, they shall be capitalized. Examples are costs of model units and their furnishings, rental facilities, semipermanent signs, grand openings, and unused rental brochures. Costs that do not meet the criteria for capitalization shall be expensed as incurred, for example, rental overhead. Initial direct costs are defined in Topic 842 and the accounting for initial direct costs is prescribed in that Topic. ##### [340-970-25-17](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:078c2de636d1237f8c594c11c66646b59a4d7b4dcbb2d4083100d419c1ea498f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If portions of a rental project are substantially completed and occupied by tenants or held available for occupancy and other portions have not yet reached that stage, the substantially completed portions shall be accounted for as a separate project. Costs incurred shall be allocated between the portions under construction and the portions substantially completed and held available for occupancy. #### Initial Rental Operations ##### [340-970-25-18](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:2f350ac6c82a955b7e007cbb153768d03b1af4bc9e748d21deb982e99ac9fe95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a real estate project is substantially completed and held available for occupancy: 1. a Rental operating costs shall be charged to expense when incurred. 2. b All carrying costs (such as real estate taxes) shall be charged to expense when incurred, depreciation on the cost of the project shall be provided. 3. c Costs to rent the project shall be amortized in accordance with paragraph [970-340-35-2](https://asc.understandingaccounting.org/asc/340/970/#340-970-35-2). ##### [340-970-25-19](https://asc.understandingaccounting.org/asc/340/970/#340-970-25-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:59:08.692Z to 2026-09-09T23:59:08.692Z Record version: sha256:2ca0f2a528bec0d9bdf9f78f03f6fc32c1d414071572bcac9ef49a6fef8a461e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A real estate project shall be considered substantially completed and held available for occupancy upon completion of tenant improvements by the developer but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup).