The Impact of the New Revenue Standard on Real Estate Sales

Abstract

In May 2014, the FASB and the IASB jointly issued significantly revised standard on revenue recognition. The new standard becomes effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period with a one-year deferral for nonpublic entities. This paper examines the impact of the new revenue standard on the accounting for real estate sales transactions of U.S. companies. Issues related to buyer’s initial and continuing investments, seller’s participation in future profit without risk of loss, repurchase agreements, and condominium sales are examined. Examples are used to illustrate the impact of the new revenue standard on financial statements.