The Financial Accounting Standards Board on Tuesday proposed to amend Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects. The proposed amendment would exclude from its scope the accounting for acquisition, development and construction costs of real estate developed and used by an entity for subsequent rental activities.

The accounting for those costs would be subject to the guidance in an Exposure Draft of a proposed Statement of Position (SOP) issued by the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants.

The FASB’s proposal would also amend APB Opinion No. 28, Interim Financial Reporting. The new rules would require that the costs that the proposed SOP would require be expensed as incurred on an annual basis also be expensed as incurred in interim periods.

AcSEC drafted the proposed SOP to deal with different methods of accounting for expenditures related to property, plant and equipment (PP&E), including improvements, replacements, betterments, additions, repairs and maintenance. The proposed SOP addresses accounting and disclosure issues related to determining which costs related to PP&E should be capitalized versus those that should be charged to expense as incurred. The proposed SOP also addresses capitalization of indirect and overhead costs and component accounting for PP&E.

If adopted as a final Statement, the proposal would be effective for annual and interim financial statements for fiscal years beginning after June 15, 2002, with earlier adoption encouraged. The comment period ends October 15, 2001.