ASC

ASC 740-972

Real Estate—Common Interest Realty Associations

740 Income Taxes

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In brief

IntermediateIncome taxesPresentationDisclosureIndustry-specific

This Subtopic applies Topic 740's income tax guidance to common interest realty associations (CIRAs), such as homeowners' and condominium associations. Because a CIRA's income taxes generally do not relate to an excess of revenues over expenses, the tax provision may be presented among other operating expenses in the statement of revenues and expenses rather than as a separate below-the-line item. It also imposes CIRA-specific note disclosures about filing status, tax liability, and expiring credits.

Key points (5)
  • The Subtopic addresses income tax presentation and disclosure issues for common interest realty associations (740-972-05-1) and uses the scope of Section 972-10-15 (740-972-15-1).
  • Because income taxes are generally not related to the excess of revenues over expenses as in commercial entities, they may be presented in the same manner as other operating expenses in the statement of revenue and expenses (740-972-45-1).
  • Notwithstanding that presentation option, common interest realty associations shall follow the guidance in Topic 740 for accounting for income taxes (740-972-45-1).
  • In addition to disclosures GAAP requires of other entities, the notes must disclose the association's income tax filing status and its liability for income taxes (740-972-50-1(a)).
  • The notes must also disclose credits from taxing authorities that will be phased out in future reporting periods (740-972-50-1(b)).

For students. The exam trap here is assuming every entity must present income tax expense as a separate caption below operating results — CIRAs may present it as an operating expense, but they still measure and account for taxes under Topic 740. Also remember CIRAs have an election-driven filing status (e.g., which return they file), which is why disclosure of filing status and tax liability is mandated.

common interest realty associationincome tax filing statusstatement of revenues and expensesoperating expense presentationphased-out tax creditsincome tax disclosures

Machine-generated study aid for ASC 740-972. Check the source paragraphs below.

740-972-05Overview and Background

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740-972-05-1
This Subtopic addresses income tax disclosure issues for common interest realty associations.

740-972-15Scope and Scope Exceptions

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Overall Guidance

740-972-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 972-10-15.

740-972-45Other Presentation Matters

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740-972-45-1
Because income taxes are generally not related to the excess of revenues over expenses as in commercial entities, they may be presented in the same manner as other operating expenses in the statement of revenue and expenses. Common interest realty associations shall follow the guidance in Topic 740.

740-972-50Disclosure

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740-972-50-1
In addition to disclosures required by generally accepted accounting principles (GAAP) for other entities, the notes to a common interest realty association's financial statements shall include disclosures about both of the following:
  1. a
    The common interest realty association's income tax filing status and its liability for income taxes
  2. b
    Credits from taxing authorities that will be phased out in future reporting periods.

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