The following table identifies the changes made to this Subtopic.
The content in this Subtopic is contained in the Real Estate Syndication Subsections and the Real Estate
Project Costs Subsections.
The Real Estate Syndication Subsections of this Subtopic provide guidance on the accounting treatment by a real estate syndication for payments to and receipts from a real estate developer that sold property to the syndication.
The Real Estate
Project Costs Subsections of this Subtopic provide recognition and measurement guidance on the allocation of capitalized costs of real estate projects and changes in the use of real estate. In addition, they discuss the treatment of real estate donated or abandoned and the recoverability of the carrying amount of real estate projects.
See Subtopic
970-340 for additional guidance on capitalization of real estate project costs.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
970-10-15.
The Real Estate Syndication Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the
Real Estate Syndication Subsection of Section 970-10-15.
The Real Estate
Project Costs Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the
Real Estate Project Costs Subsection of Section 970-10-15.
If a real estate developer sells a recently constructed office building to a public real estate syndication and negotiates a master leaseback agreement with the syndication general partner, under which the syndication pays a fee to the seller and the seller leases the vacant space at a market rate at the date of sale for a defined lease-up period,
payments to and receipts from the seller shall be treated by the syndication as adjustments to the basis of the property and will affect future depreciation. See paragraph 970-360-55-3 for guidance if the terms of the agreement meet the definition of a derivative. See Section
974-720-25 for adjustment of assets that will be transferred between a real estate investment trust and its adviser.
See Section
410-20-25 regarding accounting for retirement and environmental costs at acquisition.
As indicated in paragraph
970-360-35-1, certain donated land shall be allocated to
project costs.
Real estate donated to municipalities or other governmental agencies for uses that will benefit the project are not abandonments. The cost of the real estate donated shall be allocated as a common cost of the project.
Changes in the use of real estate comprising a project or a portion of a project may arise after significant development and construction costs have been incurred. If the change in use is made pursuant to a formal plan for a project that is expected to produce a higher economic yield (as compared to its yield based on use before change), the development and construction costs to be charged to expense shall be limited to the amount by which the capitalized costs incurred and to be incurred exceed the estimated value of the revised project when it is substantially complete and ready for its intended use.
If real estate, including rights to real estate, is abandoned (for example, by allowing a mortgage to be foreclosed or a purchase option to lapse), capitalized costs of that real estate shall be expensed. Such costs shall not be allocated to other components of the project or to other projects.
The following table identifies the changes made to this Subtopic.
The following is the text of Regulation S-X Rule 12-28, Real Estate and Accumulated Depreciation (17 CFR 210.12-28).
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Reg. § 210.12-28 Real Estate and Accumulated Depreciation1 (For certain real estate companies) Column A Column B Column C Column D Column E Column F\tColumn G\tColumn H\tColumn I Descriptions2 \"Encum- brances \"\tInitial cost to company \"Cost capitalized subsequent to acquisition\" \"Gross amount of which carried at close of period 3,4,5,6,7\" Accumulated depreciation Date of construc- tion Date acquired Life on which depreciation in latest statements of comprehensive income is computed Land Buildings and improvements \"Improve- ments \"\tCarrying costs Land Buildings and improvements Total 1\tAll money columns shall be totaled. 2\t\"The description for each property should include type of property (e.g., unimproved land, shopping center, garden apartments, etc.) and the geographical location.\" 3\tThe required information is to be given as to each individual investment included in column E except that an amount not exceeding 5 percent of the total of column E may be listed in one amount as “miscellaneous investments.” 4\t\"In a note to this schedule, furnish a reconciliation, in the following form, of the total amount at which real estate was carried at the beginning of each period for which statements of comprehensive income are required, with the total amount shown in column E: Balance at beginning of period .............................................................................................................................................. $ ............................ Additions during period: Acquisitions through foreclosure.............................................................................................. $............................... Other acquisitions........................................................................................................................................................ Improvements etc. ...................................................................................................................................................... Other (describe) ...............................................................................................................................................................$.................................. Deductions during period: ................................................................................................................... Cost of real estate sold ................................................................................................................ $ .............................. Other (describe) .......................................................................................................................................................... .............................. Balance at close of period ...................................................................................................................................................... $ ............................. \" \"If additions, except acquisitions through foreclosure, represent other than cash expenditures, explain. If any of the changes during the period result from transactions, directly or indirectly with affiliates, explain the bases of such transactions and state the amounts involved. A similar reconciliation shall be furnished for the accumulated depreciation.\" 5\t\"If any item of real estate investments has been written down or reserved against, describe the item and explain the basis for the write-down or reserve.\" 6\tState in a note to column E the aggregate cost for Federal income tax purposes. 7\tThe amount of all intercompany profits included in the total of column E shall be stated if material.
[38 FR 6068, Mar. 6, 1983. Redesignated at 45 FR 63630, Sept. 25, 1980; 83 FR 50208, Oct. 4, 2018]