real estate project costs

ASC 340-970 (the Real Estate Project Costs Subsections) governs when costs of real estate projects may be capitalized, how they are subsequently measured and amortized, and when they must be written off. Preacquisition costs are capitalized only if directly identifiable with a specific property, capitalizable if the property were owned, and acquisition is probable; option payments are always capitalized. Once a project is substantially completed and held available for occupancy, carrying and rental operating costs are expensed, depreciation begins, and capitalized rental costs are amortized.

ASC 360-970 gathers the real estate–specific property, plant, and equipment guidance in two sets of subsections: Real Estate Syndication and Real Estate Project Costs. It requires costs clearly associated with the acquisition, development, and construction of a real estate project to be capitalized and then allocated to project components (by specific identification, then relative fair value/sales value, then area methods), addresses donated and abandoned real estate and changes in use, and applies the Subtopic 360-10 impairment model project by project. For syndications, fees paid to and rentals received from a developer-seller under a master leaseback are adjustments to the basis of the property.

ASC 720-970 addresses when real estate project costs must be expensed rather than capitalized. Its core rules: internal costs of preacquisition activities for a property that will be an operating property at acquisition date are expensed as incurred (720-970-25-1), and indirect costs not clearly related to projects under development or construction — including general and administrative expenses — are charged to expense as incurred (720-970-25-3). The Subtopic defines "operating" property as one where major construction is substantially complete and the property is either available for occupancy upon tenant improvements or already income-producing (720-970-25-2).

ASC 970-10 is the Overall subtopic of the Real Estate—General Topic; it maps the industry's guidance (statement of cash flows, equity method/joint ventures, other assets and deferred costs, PP&E, debt, other expenses, consolidation, interest) and sets the pervasive scope. The Topic supplies only incremental industry-specific guidance and applies to all entities with productive activities relating to real property, excluding property used primarily in the entity's non-real estate operations (970-10-15-3). Its guidance runs in three Subsections: General (real estate ventures, partnerships, joint ventures, tax increment financing entities), Real Estate Syndication (income recognition from syndication activities), and Real Estate Project Costs (acquisition, development, construction, selling and rental costs).