Real Estate Accounting and Financial Reporting Update

Real Estate Accounting and Financial Reporting Update

December 2, 2016

Contents

Forewordiv

Acknowledgments and Contact Information

v

Introductionvi

Updates to Guidance

1

Revenue Recognition

2

Leases10

Financial Instruments

13

Impairment13

Classification and Measurement

17

Measurement-Period Adjustments

18

Simplifying the Transition to the Equity Method of Accounting

20

Consolidation -- Interests Held Through Related Parties That Are Under Common Control

21

Employee Share-Based Payment Accounting Improvements

22

Classification of Deferred Taxes

27

Alternatives for Private Companies

28

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments

30

Restricted Cash

33

On the Horizon

35

Financial Instruments

36

Hedging

36

Liabilities and Equity -- Targeted Improvements

39

Simplifying the Balance Sheet Classification of Debt

41

Goodwill and Business Combinations

43

Subsequent Accounting for Goodwill for Public Business Entities and Not-for-Profit Entities,

Including Goodwill Impairment

43

Clarifying the Definition of a Business

44

Accounting for Identifiable Intangible Assets in a Business Combination

46

Accounting for Derecognition and Partial Sales of Nonfinancial Assets46

Modification Accounting for Share-Based Payment Arrangements

48

Nonemployee Share-Based Payment Accounting Improvements

51

Disclosures by Business Entities About Government Assistance

52

ii

Contents

Disclosure Framework

53

FASB's Decision Process

53

Entity's Decision Process

54

Topic-Specific Disclosure Reviews

54

Next Steps

54

Fair Value Measurement

55

Income Taxes

58

Defined Benefit Plans

61

Other Topics

62

SEC and AICPA Updates

63

Summary of Accounting Pronouncements Effective in 2016

74

Appendixes

78

Appendix A -- Glossary of Standards and Other Literature

79

Appendix B -- Abbreviations

87

iii

Foreword

December 2, 2016

To our clients and colleagues in the real estate sector:

We are pleased to announce our ninth annual accounting and financial reporting update. Some of the notable standard-setting developments that occurred since the previous edition were the issuance of (1) new guidance on the accounting for leases and the impairment of financial instruments, (2) new guidance to clarify the classification of certain cash receipts and payments in the statement of cash flows, and (3) refinements to the FASB's new guidance on the recognition of revenue from contracts with customers.

This publication is divided into three sections: (1) "Updates to Guidance," which highlights changes to accounting and reporting standards that real estate entities need to start preparing for now; (2) "On the Horizon," which discusses standard-setting topics that will affect real estate entities as they plan for the future; and (3) "Other Topics" that may be of interest to entities in the real estate sector.

The annual accounting and financial reporting updates for the banking and securities, insurance, and investment management sectors are available (or will be available soon) on US GAAP Plus, Deloitte's Web site for accounting and financial reporting news.

As always, we encourage you to contact your local Deloitte office for additional information and assistance.

Sincerely,

Chris Dubrowski

Real Estate Industry

Professional Practice Director

Deloitte & Touche LLP

Bob O'Brien Global Real Estate Leader Deloitte & Touche LLP

iv

Acknowledgments and Contact Information

We would like to thank the following individuals for their contributions to this publication:

Johnnie Akin Teri Asarito Alex Braser Ermir Berberi Mark Bolton Lynne Campbell Ashley Carpenter Chris Cryderman Amy Davidson Jamie Davis Joe DiLeo Geri Driscoll

David Eisenberg Trevor Farber Mark Fischer John Franco Rachel Grandovic Emily Hache Eric Hatch Ben Johnson Colin Kronmiller Michelle Lacey Michael Lorenzo Mat Lorie

Stephen McKinney Peter McLaughlin Morgan Miles Adrian Mills Emily Montgomery Rob Morris Jeff Nick Magnus Orrell Jeanine Pagliaro Amy Park Taylor Paul Lauren Pesa

Christine Reicheneder Shahid Shah Inderjeet Singh Stefanie Tamulis PJ Theisen Andrew Warren John Wilde Karen Wiltsie Andrew Winters Sandy Zapata

If you have any questions about this publication, please contact any of the following Deloitte industry specialists:

Chris Dubrowski Real Estate Industry Professional Practice Director +1 203 708 4718 cdubrowski@

James Brant Real Estate Industry Deputy Professional Practice Director -- Engineering and Construction +1 513 784 7348 jbrant@

Bob O'Brien Global Real Estate Leader +1 312 486 2717 robrien@

Wyn Smith Real Estate Industry Deputy Professional Practice Director +1 469 417 2209 gesmith@

Susan L. Freshour Financial Services Industry Professional Practice Director +1 212 436 4814 sfreshour@

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