ASC

ASC 360-972

Real Estate—Common Interest Realty Associations

360 Property, Plant, and Equipment

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In brief

IntermediateRecognitionInitial measurementDisclosureIndustry-specific

This Subtopic tells common interest realty associations (CIRAs) — cooperatives, condominium associations, and homeowners associations — when to recognize common real and personal property as assets, how to measure it, and what to disclose. Cooperatives recognize all common real property because they hold title and can dispose of it and keep the proceeds; other CIRAs generally do not recognize real property directly associated with the units, and recognize property not directly associated with the units only if they have title or other evidence of ownership plus disposal discretion or significant cash-flow generation. Recognized property is measured at cost (or fair value if acquired in a nonmonetary transaction such as a developer transfer) and depreciated over estimated useful lives.

Key points (7)
  • Cooperatives shall recognize common real property as assets because they hold title and can dispose of it and retain the proceeds (360-972-25-1).
  • Most non-cooperative CIRAs do not recognize as assets real property directly associated with the units, whether or not they hold title (360-972-25-2).
  • Non-cooperative CIRAs recognize real property not directly associated with the units when they have title or other evidence of ownership and either (a) the board may dispose of it for cash and retain the proceeds or (b) it generates significant cash flows from members based on usage or from nonmembers (360-972-25-3); some CIRAs recognize all such titled property regardless of those conditions (360-972-25-4).
  • Common personal property used in operating, preserving, maintaining, repairing, and replacing common property — furnishings, recreational and maintenance equipment, work vehicles — shall be recognized as assets (360-972-25-5).
  • Recognized common property is initially measured at cost if acquired in a monetary transaction, or at fair value at the acquisition date if acquired in a nonmonetary transaction such as a nonreciprocal transfer from the developer (the developer's cost may help estimate fair value) (360-972-30-1).
  • Property and equipment recognized as assets shall be depreciated over estimated useful lives (360-972-35-1).
  • Required disclosures include the recognition and measurement policy, descriptions of common property both recognized and not recognized, the CIRA's maintenance responsibility, land/recreation lease terms, use and disposition restrictions (360-972-50-1), and depreciation expense, major classes of depreciable assets, accumulated depreciation, and depreciation methods (360-972-50-3); all property owned by a cooperative is presented on its balance sheet (360-972-50-2).

For students. The key exam trap is assuming that holding legal title automatically means the association records the asset: for condos and HOAs, property directly associated with the units is generally not recognized, and other titled property is recognized only if the board can sell it and keep the proceeds or it generates significant cash flows. Note also the cost vs. fair value split for developer-donated (nonmonetary) property.

common interest realty associationcommon real propertycommon personal propertycooperativetitle or other evidence of ownershipnonreciprocal transfer from developerdepreciation of common propertyfuture major repairs and replacements

Machine-generated study aid for ASC 360-972. Check the source paragraphs below.

360-972-00Status

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360-972-00-1
No updates have been made to this subtopic.
Paragraph Action Accounting Standards Update Date
Nonreciprocal Transfer Added Maintenance Update 2014-20 (PDF) 09/29/2014
972-360-30-1 Amended Maintenance Update 2014-20 (PDF) 09/29/2014

360-972-05Overview and Background

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360-972-05-1
This Subtopic addresses recognition and disclosure issues for common real and personal property related to common interest realty associations.

360-972-15Scope and Scope Exceptions

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Overall Guidance

360-972-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 972-10-15.

360-972-25Recognition

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Common Real Property

360-972-25-1
Cooperatives shall recognize common real property as assets. Because of their legal structure, cooperatives have title to all their common property and have the authority to dispose of it and retain the proceeds. Other common interest realty associations, such as condominiums and homeowners associations, have adopted other practices for recognizing common real property.

Real Property Directly Associated with the Units

360-972-25-2
Most common interest realty associations other than cooperatives, regardless of whether they have title, do not recognize as assets real property directly associated with the units.

Real Property Not Directly Associated with the Units

360-972-25-3
Most common interest realty associations other than cooperatives recognize real property not directly associated with the units as assets when the common interest realty association has title or other evidence of ownership of the property and any of the following conditions are met:
  1. a
    The common interest realty association can dispose of the property, at the discretion of its board of directors, for cash or claims to cash, with the common interest realty association retaining the proceeds.
  2. b
    The property is used by the common interest realty association to generate significant cash flows from members on the basis of usage or from nonmembers.
360-972-25-4
However, some common interest realty associations recognize as assets all real property to which they have title or other evidence of ownership and that is not directly associated with the units, regardless of whether either of the above conditions is met.

Personal Property

360-972-25-5
Common interest realty associations shall recognize common personal property, such as furnishings, recreational equipment, maintenance equipment, and work vehicles, that is used by the common interest realty association in operating, preserving, maintaining, repairing, and replacing common property and providing other services, as assets.

360-972-30Initial Measurement

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360-972-30-1
Common property recognized as assets of a common interest realty association shall be initially measured at the common interest realty association's cost to acquire it if the common interest realty association acquired the property in a monetary transaction. If the common interest realty association acquired the property in a nonmonetary transaction, such as by a nonreciprocal transfer from the developer, and if the property is recognized as an asset of the common interest realty association, the common interest realty association shall initially measure the property using fair value at the date of its acquisition. It may be helpful to consider the developer's cost, if it is known, in determining the fair value.

360-972-35Subsequent Measurement

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360-972-35-1
Property and equipment recognized as assets by common interest realty associations shall be depreciated based on their estimated useful lives.

360-972-50Disclosure

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General Information

360-972-50-1
All of the following information about a common interest realty association's common property shall be disclosed in the notes to its financial statements:
  1. a
    The accounting policy for recognition and measurement of common property
  2. b
    A description of common property recognized as assets in the common interest realty association's balance sheet
  3. c
    A description of common property to which the common interest realty association has title, or other evidence of ownership, that is not recognized as assets in the common interest realty association's balance sheet
  4. d
    The common interest realty association's responsibility to preserve and maintain the common property
  5. e
    Terms and conditions of existing land or recreation leases
  6. f
    Restrictions on the use or disposition of the common property.
360-972-50-2
All property owned by a cooperative shall be presented on its balance sheets. Cooperatives generally own the real estate and have the ability to borrow and pledge their assets as collateral. Some cooperatives, therefore, do not accumulate funds for future major repairs and replacements.

Depreciation

360-972-50-3
For property and equipment recognized as assets by common interest realty associations the following information shall be disclosed:
  1. a
    Depreciation expense for the period
  2. b
    Balances of major classes of depreciable assets, by nature or function, at the reporting date
  3. c
    Accumulated depreciation, either by major classes of depreciable assets or in total, at the reporting date
  4. d
    A general description of the method or methods used in computing depreciation for major classes of depreciable assets.

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