ASC

ASC 340-978

Real Estate—Time-Sharing Activities

340 Other Assets and Deferred Costs

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In brief

IntermediateRecognitionIndustry-specificRevenueInventory and PP&E

This Subtopic governs deferred cost recognition for real estate time-sharing activities. The default rule is that all costs incurred to sell time-sharing intervals are expensed as incurred unless they qualify for capitalization as incremental costs of obtaining a contract under 340-40-25-1 through 25-4. Seller financing costs (e.g., loan origination costs) follow Subtopic 310-20, and incremental costs to rent units during holding periods are deferred and then expensed (or netted against inventory) when the rental occurs.

Key points (6)
  • All costs incurred to sell time-sharing intervals shall be charged to expense as incurred unless they qualify for capitalization under paragraphs 340-40-25-1 through 25-4 (340-978-25-1).
  • Costs incurred by a seller related to financing, such as loan origination costs, are accounted for under Subtopic 310-20 (340-978-25-4).
  • Costs to rent units during holding periods are deferred only if they are both directly associated with rental transactions with recovery reasonably expected, and incremental to that transaction (340-978-25-5).
  • A commission is the cited example of a directly associated, incremental holding-period rental cost (340-978-25-5).
  • Deferred holding-period rental costs are charged to expense, or netted in the reduction of inventory costs per 978-330-35-3, in the period the rental takes place (340-978-25-5).
  • Much of the legacy time-sharing selling-cost deferral guidance (25-1(a)-(b), 25-2, 25-3, 40-1, 40-2) was superseded by ASU 2014-09, pushing analysis to Subtopic 340-40 (340-978-60-1).

For students. The exam trap is assuming time-sharing sellers still get the old industry-specific deferral of selling costs — ASU 2014-09 superseded that, so capitalization now depends solely on the 340-40 incremental-cost test, with expensing as the default. Remember the two distinct carve-outs: financing costs go to 310-20, and holding-period rental costs (like commissions) are deferred until the rental occurs.

time-sharing intervalscosts to sellincremental cost of obtaining a contractholding period rental costsdeferred costsloan origination costsinventory cost reduction

Machine-generated study aid for ASC 340-978. Check the source paragraphs below.

340-978-00Status

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340-978-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Deposit MethodSupersededAccounting Standards Update No. 2014-0905/28/2014
Incidental OperationsSupersededAccounting Standards Update No. 2014-0905/28/2014
PhaseSupersededAccounting Standards Update No. 2014-0905/28/2014
Phase (2nd def.)AmendedAccounting Standards Update No. 2014-0603/14/2014
ProjectSupersededAccounting Standards Update No. 2014-0905/28/2014
Time-SharingAmendedAccounting Standards Update No. 2014-0603/14/2014
Undivided Interest (2nd def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
978-340-25-1AmendedAccounting Standards Update No. 2014-0905/28/2014
978-340-25-2SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-25-3SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-40-1SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-40-2SupersededAccounting Standards Update No. 2014-0905/28/2014
978-340-60-1AmendedAccounting Standards Update No. 2014-0905/28/2014

340-978-05Overview and Background

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340-978-05-1
This Subtopic addresses real estate time-sharing deferred cost recognition issues.

340-978-15Scope and Scope Exceptions

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Overall Guidance

340-978-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 978-10-15.

340-978-25Recognition

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Costs to Sell Time-Sharing Intervals

340-978-25-1
All costs incurred to sell time-sharingintervals should be charged to expense as incurred unless they specifically qualify for capitalization in accordance with the guidance in paragraphs
340-40-25-1 through 25-4
.
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2014-09.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2014-09.

Costs Related to Financing

340-978-25-4
Costs incurred by a seller that are related to financing, such as loan origination costs, shall be accounted for in accordance with Subtopic 310-20.

Costs to Rent Units During Holding Periods

340-978-25-5
Costs incurred to rent units during holding periods shall be deferred if they are both:
  1. a
    Directly associated with, and their recovery is reasonably expected from, transactions involving the rental of units during holding periods
  2. b
    Incremental, that is, the costs would not have been incurred by the seller had a particular holding period rental transaction not occurred.
An example of a directly associated, incremental cost is a commission. Deferred costs to rent time-sharing units during holding periods shall be charged to expense, or netted in the reduction of inventory costs (as described in paragraph 978-330-35-3), in the period in which the rental takes place.

340-978-40Derecognition

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340-978-60Relationships

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340-978-60-1
For expense determination of all costs incurred to sell time-sharing intervals see Subtopic 340-40 on the incremental cost of obtaining a contract with a customer.

Related subtopics