retail land sales

This subtopic governs the measurement, derecognition, and disclosure of receivables arising from retail land sales. Its core rule is that an allowance for contract cancellations must be provided for receivables not expected to be collected because of cancellation, estimated from historical collection data drawn from a representative, current sample covering an adequate period (310-976-35-1). Cancelled contract receivable balances are charged in full against that allowance (310-976-40-1), and specified receivable disclosures are required (310-976-50-1).

This Subtopic sets the inventory-related disclosure requirements for entities engaged in retail land sales operations, focusing on future expenditures for land improvements. Entities must disclose the estimated total costs and timing of improvement expenditures for major selling areas for each of the five years after the balance sheet date, plus any recorded obligations for improvements (330-976-50-1).

ASC 605-976 formerly contained the industry-specific revenue recognition guidance for retail land sales (sales of lots in subdivided developments, typically on installment contracts with refund/cancellation periods), including the percentage-of-completion and installment methods for such sales. Every paragraph in the subtopic — Sections 05, 15, 25, 30, 35, and 55 — was superseded by Accounting Standards Update No. 2014-09 (Revenue from Contracts with Customers). The subtopic therefore contains no remaining operative guidance; retail land sales are now accounted for under ASC 606 (and ASC 610-20 for sales of nonfinancial assets to noncustomers).

ASC 705-976 addresses the measurement of costs related to retail land sales, using the same scope as the Real Estate—Retail Land Overall Subtopic (976-10-15). Its substantive initial measurement guidance was superseded by ASU 2014-09, so the Subtopic now simply directs preparers to Subtopic 340-40 for incremental costs of obtaining a contract with a customer and costs to fulfill a contract.

ASC 976-10 is the Overall subtopic of the Real Estate—Retail Land Topic, which provides incremental industry-specific guidance for retail land sales — high-volume sales of lots subdivided from large tracts of land, characterized by very small down payments and a sales contract or buyer's note for the balance. It defines the scope of the Topic (entities selling such lots on a volume basis where the note could not be sold to a bank without substantial discount and the seller cannot enforce against the buyer's general credit) and lists the transactions excluded from that scope. Entities in scope must also apply all other applicable GAAP not contained in this Topic.