Improving The Real Estate Industry Essay

1353 Words Nov 24th, 2015 null Page
Now, let’s us take a look at how the updated revenue recognition standard will impact the real estate industry. In the real estate sector, contracts with customers entails various services. Under the new standard, entities in this sector will need to determine whether these services should be treated as a separate contract. The identification of performance obligations can be complex as well for the real estate sector. Below is an example about the identification of performance obligations (EY, 2015, p.12).
Example 1-2/Illustration 1-6 Identifying performance obligations in a property management contract
Operator R enters into a five-year contract with Owner S to provide property management services for a regional shopping center. The contract stipulates that Operator R will perform the following functions:
• Manage day-to-day operations of the center for a fee of 5% of the property’s quarterly lease revenues
• Provide leasing services for a fee of CU5 per square foot for new lease agreements and CU3 per square foot for lease agreement renewals.
Operator R evaluates each of the services provided in the contract to identify whether separate performance obligations are present. Operator R also considers the underlying activities that comprise each of the services to determine whether they meet the criteria to be accounted for as a single performance obligation (or whether the service may be several performance obligations).
Operator R determines that the leasing services…

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