Accounting for Real Estate Transactions: A Guide For Public Accountants and Corporate Financial Professionals

455 Pages·2008·1.61 MB·English

by  Maria K. Davis

A
CCOUNTING FOR
R E T
EAL STATE RANSACTIONS
A G P A
UIDE FOR UBLIC CCOUNTANTS

AND
C F P
ORPORATE INANCIAL ROFESSIONALS
M K. D
ARIA AVIS
JOHN WILEY & SONS, INC.
ffffiirrss..iinndddd iiiiii 33//66//0088 1100::0044::3344 PPMM
ffffiirrss..iinndddd vvii 33//66//0088 1100::0044::3344 PPMM
A
CCOUNTING FOR
R E T
EAL STATE RANSACTIONS
ffffiirrss..iinndddd ii 33//66//0088 1100::0044::3322 PPMM
BECOME A SUBSCRIBER!
Did you purchase this product from a bookstore?
If you did, it’s important for you to become a subscriber. John Wiley & Sons, Inc. may publish,
on a periodic basis, supplements and new editions to refl ect the latest changes in the subject matter
that you need to know in order to stay competitive in this ever-changing industry. By contacting
the Wiley offi ce nearest you, you’ll receive any current update at no additional charge. In addition,
you’ll receive future updates and revised or related volumes on a 30-day examination review.
If you purchased this product directly from John Wiley & Sons, Inc., we have already recorded
your subscription for this update service.
To become a subscriber, please call 1-877-762-2974 or send your name, company name (if
applicable), address, and the title of the product to:
mailing address: Supplement Department
John Wiley & Sons, Inc.
One Wiley Drive
Somerset, NJ 08875
e-mail: [email protected]
fax: [phone]
online: www.wiley.com
For customers outside the United States, please contact the Wiley offi ce nearest you:
Professional & Reference Division John Wiley & Sons, Ltd.
John Wiley & Sons Canada, Ltd. The Atrium
22 Worcester Road Southern Gate, Chichester
Etobicoke, Ontario M9W 1L1 West Sussex PO 19 8SQ
CANADA ENGLAND
Phone: [phone] Phone: [phone]
Phone: [phone] Fax: [phone]
Fax: [phone] Email: [email protected]
Email: [email protected]
John Wiley & Sons Australia, Ltd. John Wiley & Sons (Asia) Pte., Ltd.
33 Park Road 2 Clementi Loop #02-01
P.O. Box 1226 SINGAPORE 129809
Milton, Queensland 4064 Phone: [phone]
AUSTRALIA Fax: [phone]
Phone: [phone] Customer Service: 65-64604280
Fax: [phone] Email: [email protected]
Email: [email protected]
ffffiirrss..iinndddd iiii 33//66//0088 1100::0044::3333 PPMM
A
CCOUNTING FOR
R E T
EAL STATE RANSACTIONS
A G P A
UIDE FOR UBLIC CCOUNTANTS

AND
C F P
ORPORATE INANCIAL ROFESSIONALS
M K. D
ARIA AVIS
JOHN WILEY & SONS, INC.
ffffiirrss..iinndddd iiiiii 33//66//0088 1100::0044::3344 PPMM
Portions of various FASB documents, copyright by the Financial Accounting Standards Board, 401 Merritt 7,
PO Box 5116, Norwalk, CT 06856-5116, are reproduced with permission. Complete copies of those
documents are available from the FASB.
Portions of various AICPA documents are reprinted with permission. Copyright 2008 by the American
Institute of Certifi ed Public Accountants, Inc. All rights reserved.
Portions of this book have their origin in copyrighted materials from the International Accounting Standards
Board. These are noted by reference to the specifi c pronouncements. Complete copies of the international
standards are available from the IASB. Copyright © International Accounting Standards Board, 30 Cannon
Street, London EC4M 6XH, United Kingdom.
This book is printed on acid-free paper. (cid:1)
Copyright © 2008 by Maria K. Davis. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or
by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted
under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permis-
sion of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright
Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax [phone], or
on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the
Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011,
fax [phone], or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in
preparing this book, they make no representations or warranties with respect to the accuracy or completeness
of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a
particular purpose. No warranty may be created or extended by sales representatives or written sales m aterials.
The advice and strategies contained herein may not be suitable for your situation. You should consult with a
professional where appropriate. Neither the publisher nor author shall be liable for any loss of profi t or any
other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services, or technical support, please contact our Customer
Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or
fax [phone].
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may
not be available in electronic books.
For more information about Wiley products, visit our Web site at http://www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
Davis, Maria K.
Accounting for real estate transactions: a guide for public accountants and corporate fi nancial
professionals / Maria K. Davis.
p. cm.
Includes index.
ISBN 978-0-470-19852-0 (cloth)
1. Real property—Accounting. 2. Real estate investment—Accounting. I. Title.
HF5686.R3D38 2008
657'.8335—dc22
2007043222
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
ffffiirrss..iinndddd iivv 33//66//0088 1100::0044::3344 PPMM
To LEON MAYSHAK
who taught me the ins and outs of real estate accounting.
ffffiirrss..iinndddd vv 33//66//0088 1100::0044::3344 PPMM
ffffiirrss..iinndddd vvii 33//66//0088 1100::0044::3344 PPMM
CONTENTS
P
REFACE XV
A A
BOUT THE UTHOR XVII
A
BBREVIATIONS XIX
PART 1 ACCOUNTING FOR REAL ESTATE
TRANSACTIONS—GENERAL 1
C 1 A , D ,
HAPTER CQUISITION EVELOPMENT AND
C R E 3
ONSTRUCTION OF EAL STATE
1.1 Overview 4
1.2 Acquisition, Development, and Construction Costs 5
1.2.1 Preacquisition Costs 6
1.2.2 Project Costs 9
1.2.3 Cost Allocation 16
1.2.4 C hange in Estimates or Project Plans and
Abandonments of Projects 19
1.3 C osts Incurred to Sell or Rent a
Real Estate Project 21
1.3.1 C osts Incurred to Sell a
Real Estate Project 21
1.3.2 C osts Incurred to Rent a
Real Estate Project 24
1.4 Incidental Operations 24
1.5 Accounting for Costs Incurred Subsequent to
Project Completion 25
1.5.1 D etermining the Date of Project
Completion 25
1.5.2 C osts Incurred Subsequent to Project
Completion 26
vii
ffttoocc..iinndddd vviiii 33//1100//0088 55::2233::4400 PPMM