# ASC 842-974: Leases — Real Estate—Real Estate Investment Trusts Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/974/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:58:41.636Z to 2026-09-10T01:58:53.121Z Record version: sha256:2c2cfc6dcd596d0b03f775a081c9a1e999a42dc9c7c0ca190208c967ae54537b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-974: Leases — Real Estate—Real Estate Investment Trusts ### Machine-generated study aids ```json { "summary": "This narrow subtopic tells a real estate investment trust (REIT) how much it may capitalize when a related service corporation performs leasing services for it. The service corporation is never treated as an independent third party, no matter how the REIT accounts for its investment in it (equity method, consolidation, etc.). Capitalized amounts are capped at the initial direct costs the REIT could have capitalized under 842-10-30-9 through 30-10 had it incurred the leasing costs directly.", "key_points": [ "The Subtopic addresses recognition issues for a REIT that holds an investment in a service corporation providing leasing services (842-974-05-1).", "Scope follows Section 974-10-15, the REIT Overall Subtopic scope (842-974-15-1).", "Regardless of the REIT's method of accounting for its investment, the service corporation shall not be considered an independent third party (842-974-25-1).", "Costs capitalized by the REIT for leasing services provided by the service corporation shall be no greater than the initial direct costs that would have been capitalized had the REIT incurred the costs directly (842-974-25-1, referencing 842-10-30-9 through 30-10).", "Any excess of amounts charged by the service corporation over that initial direct cost ceiling therefore cannot be capitalized." ], "categories": [ "Recognition", "Initial measurement", "Leases", "Industry-specific" ], "audience_level": "intermediate", "student_note": "Tested as a related-party anti-abuse rule: a REIT cannot inflate capitalized leasing costs by routing them through an affiliated service corporation. The common misunderstanding is thinking the accounting method for the investment (or the fee actually paid) drives the answer—it does not; the cap is always the initial direct costs the REIT itself could have capitalized.", "related_topics": [ "842-10", "974-10", "970-340", "323-10", "810-10" ], "key_concepts": [ "real estate investment trust", "service corporation", "initial direct costs", "leasing services", "related party not independent third party", "capitalization ceiling", "lessor cost capitalization" ] } ``` Source downloaded (UTC): 2026-09-10T01:58:41.636Z to 2026-09-10T01:58:41.636Z Record version: sha256:06743285200cfa1b8af5f401e77550a0e72713954d29943ae02f21600300ef19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-974-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/842/974/#00-status) SEC content: no ##### [842-974-00-1](https://asc.understandingaccounting.org/asc/842/974/#842-974-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:58:41.636Z to 2026-09-10T01:58:41.636Z Record version: sha256:ceed2e6e9588a0f7c1e0317a482e68098437bf06a963c085c5286536be2f5ce1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
ContractAddedAccounting Standards Update No. 2016-0202/25/2016
Initial Direct CostsAddedAccounting Standards Update No. 2016-0202/25/2016
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Real Estate Investment TrustAddedAccounting Standards Update No. 2016-0202/25/2016
Service CorporationAddedAccounting Standards Update No. 2016-0202/25/2016
974-842-05-1AddedAccounting Standards Update No. 2016-0202/25/2016
974-842-15-1AddedAccounting Standards Update No. 2016-0202/25/2016
974-842-25-1AddedAccounting Standards Update No. 2016-0202/25/2016
Source downloaded (UTC): 2026-09-10T01:58:45.033Z to 2026-09-10T01:58:45.033Z Record version: sha256:b0cedaa6abdfd26394b8de91601cd18b83d5edc95db54b116d65f692baf27be5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-974-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/842/974/#05-overview-and-background) SEC content: no ##### [842-974-05-1](https://asc.understandingaccounting.org/asc/842/974/#842-974-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:58:45.033Z to 2026-09-10T01:58:45.033Z Record version: sha256:58e70c63b3c7fb462db4a6796867715a2bb0fb3642a0b602c1e3ff1bee14025d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses recognition issues for a [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).") with an investment in a [service corporation](https://asc.understandingaccounting.org/glossary/s/#service-corporation "A real estate investment trust may establish a service corporation to perform services for the real estate investment trust or for third parties. Service corporations may provide property management and leasing services, as well as services to acquire, develop, construct, finance, or sell real estate projects.") providing leasing services. Source downloaded (UTC): 2026-09-10T01:58:48.876Z to 2026-09-10T01:58:48.876Z Record version: sha256:b2b2cfac107657400e5c2a1186e92fe6bc941c0fb3e2afb0dbaa3dc86d998448 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-974-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/842/974/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [842-974-15-1](https://asc.understandingaccounting.org/asc/842/974/#842-974-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:58:48.876Z to 2026-09-10T01:58:48.876Z Record version: sha256:03667e2e0c9cf7eb00ca11997d3b90321fd2ddd2ccab2aabe7beb1ea78288acc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 974-10-15. Source downloaded (UTC): 2026-09-10T01:58:53.121Z to 2026-09-10T01:58:53.121Z Record version: sha256:fdb7bb87c12b0192375e3a79960afa8bac2e41a69bb381890b9e052fd79dd9be Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-974-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/842/974/#25-recognition) SEC content: no ##### [842-974-25-1](https://asc.understandingaccounting.org/asc/842/974/#842-974-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:58:53.121Z to 2026-09-10T01:58:53.121Z Record version: sha256:5a197c35979ac5c214d324a6b9f27f6c2daf82f67fe5f8d2519c77a03f8dcfa5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regardless of the method of accounting used by a [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 its investment in a [service corporation](https://asc.understandingaccounting.org/glossary/s/#service-corporation "A real estate investment trust may establish a service corporation to perform services for the real estate investment trust or for third parties. Service corporations may provide property management and leasing services, as well as services to acquire, develop, construct, finance, or sell real estate projects."), the service corporation shall not be considered an independent third party and the amount of costs capitalized by the real estate investment trust for leasing services provided by the service corporation shall be no greater than the amount of [initial direct costs](https://asc.understandingaccounting.org/glossary/i/#initial-direct-costs "Incremental costs of a lease that would not have been incurred if the lease had not been obtained.") (see paragraphs [842-10-30-9 through 30-10](https://asc.understandingaccounting.org/asc/842/10/#842-10-30-9) ) that would have been capitalized had the real estate investment trust incurred the costs directly.