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Revenue Recognition on a Development Property

Revenue Recognition on a development property

A company operates by buying dilapidated property with multi units (say for example a shopping centre), then selling a lease of the units on a 125 year term (long) before developing all of the property. The development is estimated to take 1 year. During the development, the company agrees to pay rent to the new landlord and will once complete also find a tenant for the unit who will then pay the new landlord directly.

Q - As the long leaseholds are sold upfront, should the income be linked to the development (be it % build or other) and recognised as such against the development profit? Or is there another way of recognising income appropriately? IE - after the build. In the first year etc,?

thanks

 

 

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