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Developers & Real Estate Investment Trusts (REITs)Real estate development is the process by which an entity makes improvements to real property, thereby increasing its value. A developer can build for others or retain the completed real estate as an investment. One unique type of real estate investment entity is called a real estate investment trust, or REIT. A REIT is a company that owns, and in most cases, operates income-producing real estate. Some REITs also engage in financing real estate.To qualify as a REIT, a company must have most of its assets and income tied to real estate investments and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends. A company that qualifies as a REIT is permitted to deduct dividends paid to its shareholders from its corporate taxable income. If the REIT is a non-governmental organization, it is subject to Topic 820 (FAS 157) reporting. Topic 820 requires that a REIT or real estate development company disclose the valuations of its investments at fair value. Topic 820 – Fair Value Measurements and Disclosures is effective for any financial statement issued under United States Generally Accepted Accounting Principles (U.S. GAAP) after November 15, 2007. In December, 2009, Topic 820 was amended to include more specific reporting requirements, particularly for assets or liabilities that fall under Level 3 disclosures which generally are illiquid, have no market activity or pricing information and thus are more difficult to value. These are the additional disclosure requirements that were instituted as of December, 2009: Disclose the amounts of significant transfers in and/or out of Level 1 and Level 2 fair value measurements and the reasons for the transfers. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present information about purchases, sales, issuances, and settlements on a gross basis rather than as one net number. Provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity should apply judgment in determining the appropriate classes of assets and liabilities. Provide disclosures about the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or Level 3.Final amendments to Topic 820 were effective for reporting periods starting after December 15, 2009, except for the requirement to provide the Level 3 activity for sales, purchases, issuances, and settlements on a gross basis, which will be effective for reporting periods beginning after December 15, 2010. DerivActiv has received a SAS 70 Type II certification by an independent advisor. For more information on GASB 53 reporting, call us at (866) 200-9012 or click here to request more information. |
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Topic 820 Amendments Topic 820 Application Topic 820 Definition of Fair Value Topic 820 Derivatives Topic 820 Disclosure Topic 820 Disclosure Example Topic 820 Disclosure Requirements Topic 820 Guidance Topic 820 Implementation Topic 820 Mark to Market Topic 820 Level 1 Topic 820 Private Equity Topic 820 Valuation Services |
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