5.7 Real Estate Investments

5.7.1 Sale of an Investment in a Real Estate Venture

ASC 970-323

40-1 A sale of an investment in a consolidated real estate venture (including the sale of stock in a corporate real estate venture) shall be evaluated under the guidelines set forth in paragraphs 360-10-40-3A through 40-3B. The sale of a noncontrolling investment in a real estate venture that is being accounted for in accordance with Topic 320 on investments — debt securities; Topic 321 on investments — equity securities; Topic 323 on investments — equity method and joint ventures; or Topic 325 on investments — other, shall be accounted for in accordance with the guidance in Topic 860 on transfers and servicing.

The sale of an investment in real estate, including an investment accounted for under the equity method, is not treated as a sale of the underlying real estate. In a transfer of only an equity method investment in which the investee holds nonfinancial assets, the seller will account for the transfer under ASC 860.

However, in certain unique circumstances, if a transfer to a counterparty (that does not meet the definition of a customer in ASC 606) in a contract represents a group of assets that (1) doesn’t constitute a business and (2) includes both an equity method investment and a nonfinancial asset whose fair value is equal to substantially all of the fair value of the assets transferred, the equity method investment would be considered part of the entire nonfinancial asset transaction under ASC 610-20 (see ASC 610-20-15-5). Also see Deloitte’s Roadmap Revenue Recognition for further information regarding the application of ASC 610-20.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.