Deferred revenue (also known as unearned revenue) can arise from several types of transactions, including:
- Deposits received on real estate sales which are insufficient to fully recognize a sale under GAAP (e.g., less than 10 percent for multi-family residential property, or 20 to 25 percent for undeveloped land) resulting in use of the cost-recovery method, the installment method, the reduced profit method, or percentage-of-completion method
- Fees or grants for services received prior to completion of the earnings process
- Rents received prior to the period earned
- Deferred developer fees
This paper discusses deferred revenue situations and provides sample disclosure language for several scenarios.