Statement of Financial Accounting Standards No. 152--Accounting for Real Estate Time-Sharing Transactions.

(An amendment of FASB Statements No. 66 and 67)

SUMMARY

This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2.

This Statement is effective for financial statements for fiscal years beginning after June 15, 2005.

CONTENTS

Introduction/1-2
Standards of Financial Accounting and
  Reporting: Amendments to Existing
    Pronouncements/3-4
Effective Date and Transition/5
Appendix: Background Information and Basis
  for Conclusions/A1-A6

INTRODUCTION

1. FASB Statements No. 66, Accounting for Sales of Real Estate, and No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, were issued in 1982 as part of the process of extracting specialized accounting and reporting principles and practices from AICPA Statements of Position (SOPs) and AICPA Industry Accounting Guides (Guides) and issuing them in FASB Statements after appropriate due process. Statement 66 established the financial accounting and reporting standards for sales of real estate. Statement 67 established the financial accounting and reporting standards for the acquisition, development, construction, selling, rental costs, and initial operations of real estate projects. In its deliberations of Statement 66, the Board acknowledged that sales of time-sharing interests were not addressed in the SOPs and Guides. The Board concluded that the sales of real estate time-sharing interests should be accounted for as sales of real estate using the other-than-retail-land-sales model and that further guidance should not be provided at that time.

2. In the years following the issuance of Statements 66 and 67, changes in the methods used by the real estate time-sharing industry to offer its products resulted in divergent accounting practices including practices associated with revenue recognition, recording of credit losses, and the treatment of selling costs. In response, the AICPA's Accounting

Standards Executive Committee developed SOP 04-2, Accounting for Real Estate Time-Sharing Transactions, which applies to all real estate time-sharing transactions. This Statement amends Statements 66 and 67 in association with the issuance of SOP 04-2.

STANDARDS OF FINANCIAL ACCOUNTING AND REPORTING

Amendments to Existing Pronouncements

3. FASB Statement No. 66, Accounting for Sales of Real Estate, is amended as follows (added text is underlined):

a. Paragraph 2:

   Although this Statement applies to all sales of
   real estate, many of the extensive provisions
   were developed over several years to deal
   with complex transactions that are frequently
   encountered in enterprises that specialize in
   real estate transactions. The decision trees in
   Appendix F highlight the major provisions of
   the Statement and will help a user of the
   Statement identify criteria that determine
   when and how profit is recognized. Those
   using this Statement to determine the accounting
   for relatively simple real estate sales
   transactions will need to apply only limited
   portions of the Statement. The general requirements
   for recognizing all of the profit
   on a nonretail land sale at the date of sale are
   set forth in paragraphs 3-5 and are highlighted
   on the first decision tree. Paragraphs 6-18
   elaborate on those general provisions. Paragraphs
   19-43 provide more detailed guidance
   for a variety of more complex transactions.
   Real estate time-sharing transactions
   should be accounted for as nonretail land
   sales. AICPA SOP 04-2, Accounting for Real
   Estate Time-Sharing Transactions, provides additional
   guidance on the accounting for real
   estate time-sharing transactions.

4. FASB Statement No. 67, Accounting for Costs and initial Rental Operations of Real Estate Projects, is amended as follows:

a. Paragraph 2:

This Statement does not apply to:

a. Real estate developed by an enterprise for use in its own operations, (1) other than for sale or rental.

b. "Initial direct costs" of sales-type, operating, and other types of leases, which are defined in FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases. The accounting for initial direct costs is prescribed in FASB Statement No. 13, Accounting for Leases, as amended by Statement 91 and FASB Statement No. 98, Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases.

c. Costs directly related to manufacturing, merchandising, or service activities as distinguished from real estate activities.

Paragraphs 20-23 of this Statement do not apply to real estate rental activity in which the predominant rental period is less than one month. Paragraphs 10 and 17-19 of this Statement do not apply to real estate timesharing transactions. AICPA Statement of Position 04-2, Accounting for Real Estate Time-Sharing Transactions provides guidance on the accounting for those transactions.

EFFECTIVE DATE AND TRANSITION

5. This Statement shall be effective for financial statements for fiscal years beginning after June 15, 2005. Restatement of previously issued financial statements is not permitted.

This Statement was adopted by the unanimous vote of the seven members of the Financial Accounting Standards Board:

Robert H. Herz, Chairman George J. Batavick G. Michael Crooch Gary S. Schieneman Katherine Schipper Leslie F. Seidman Edward W. Trott

Copyright [c] 2004 by Financial Accounting Standards Board. All rights reserved. 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, or otherwise, without the prior written permission of the Financial Accounting Standards Board.