Improving The Real Estate Industry Essay
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…