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

13

Financial Instruments

Impairment13

Classification and Measurement

17

Measurement-Period Adjustments

18

Simplifying the Transition to the Equity Method of Accounting

20

Consolidation ¡ª 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 ¡ª 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 ¡ª Glossary of Standards and Other Literature

79

Appendix B ¡ª 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

David Eisenberg

Stephen McKinney

Christine Reicheneder

Teri Asarito

Trevor Farber

Peter McLaughlin

Shahid Shah

Alex Braser

Mark Fischer

Morgan Miles

Inderjeet Singh

Ermir Berberi

John Franco

Adrian Mills

Stefanie Tamulis

Mark Bolton

Rachel Grandovic

Emily Montgomery

PJ Theisen

Lynne Campbell

Emily Hache

Rob Morris

Andrew Warren

Ashley Carpenter

Eric Hatch

Jeff Nick

John Wilde

Chris Cryderman

Ben Johnson

Magnus Orrell

Karen Wiltsie

Amy Davidson

Colin Kronmiller

Jeanine Pagliaro

Andrew Winters

Jamie Davis

Michelle Lacey

Amy Park

Sandy Zapata

Joe DiLeo

Michael Lorenzo

Taylor Paul

Geri Driscoll

Mat Lorie

Lauren Pesa

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@

Wyn Smith

Real Estate Industry

Deputy Professional Practice Director

+1 469 417 2209

gesmith@

James Brant

Real Estate Industry

Deputy Professional Practice Director ¡ª

Engineering and Construction

+1 513 784 7348

jbrant@

Susan L. Freshour

Financial Services Industry

Professional Practice Director

+1 212 436 4814

sfreshour@

Bob O¡¯Brien

Global Real Estate Leader

+1 312 486 2717

robrien@

v

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