OK thanks for that clarification.
The primary source of accounting for real estate sales is the Financial Accounting Standards Board's (FASB) Statement 66.
Sometimes realtors get confused by Statement 66 because its focus, rightly, is on the economic SUBSTANCE of the transaction.
But in that venue, there is only the sales contract (the standard CONTRACT for sale and purchase — usually approved by the state association
of realtors and the state bar association) and the CLOSING.
But lots can happen between those two things, so 66 comes into play at closing time.
What 66 does for the real estate world is tweak the accrual method by expanding the basic accrual method to the full accrual method, requiring the following:
The sale is consummated;
Initial and continuing investments by the buyer in the property are sufficient;
All the risks and rewards of ownership reside with buyer;
There is no continuing duty or involvement by the seller post-sale (after closing); and,
There is no future subordination of any buyer receivable (seller financing cases).
Generally, a down payment of at least 20% is required. If not, then at least 90% of sales contract has to be be collected in full IF those contracts are not cancelled within six months of their recording.
What this does is ensure that contracts satisfy the full accrual method.
And this is not an exhaustive listing, but the revenue is recognized at closing if the Statement 66 conditions for the full accrual method are met.
Then if not, there are prescribed methods;
Deposit Method ... Where no revenue is recognized and no buyer’s receivable is recorded at the closing date. Instead, the seller entity continues to carry the property on its financials primarily because of the uncertainty of the seller’s investment.
Cost Recovery Method ... The seller does not recognize any revenue at closing but only when the buyer’s total payments (including any principal and interest on assumed debt or the seller receivables) exceed the seller’s cost of the property.
Installment Method ... No revenue is recognized at closing except for any initial payments. Subsequent revenue recognition is based on a gross profit ratio. (Probably the most widely used where the sale doesn't qualify for the full accrual method of accounting under Statement 66, and the sales price is paid through seller’s receivable or assumptions.), and
Reduced Profit Method ... wherea discounting technique is used. The buyer’s receivable is discounted to the present value of minimum annual payments due over 20 years for land debt, or over a normal term for other realty.
Here's the full FASB statement:
Hope this helps
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