# ASC 720-974-25: Other Expenses — Real Estate—Real Estate Investment Trusts — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

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## ASC 720-974-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/720/974/#25-recognition)

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#### Operating Support of the Real Estate Investment Trust by the Adviser

##### [720-974-25-1](https://asc.understandingaccounting.org/asc/720/974/#720-974-25-1)

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Various methods are employed by advisers to ensure a certain return to the [real estate investment trust](https://asc.understandingaccounting.org/glossary/r/#real-estate-investment-trust "Real estate investment trusts generally are formed as trusts, associations, or corporations. They employ equity capital, coupled with substantial amounts of debt financing, in making real estate loans and investments. Real estate investment trusts must distribute substantially all of their taxable income to their shareholders annually in order to retain their favorable tax status (that is, dividends paid are treated as deductions in arriving at taxable income).") for certain periods. Some of these methods are:

1.  a
    
    Purchasing a loan or a property at an amount in excess of fair value
    
2.  b
    
    Forgiving indebtedness
    
3.  c
    
    Reducing advisory fees
    
4.  d
    
    Providing required compensating balances
    
5.  e
    
    Making outright cash payments.

##### [720-974-25-2](https://asc.understandingaccounting.org/asc/720/974/#720-974-25-2)

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Accounting by a real estate investment trust for operating support from its adviser would include either of the following:

1.  a
    
    Adjustment of any assets (or liabilities) which will be transferred between the entities to fair value as of the date of the transaction
    
2.  b
    
    Recognition, as income or as a reduction of advisory fees, of the operating support effectively obtained.