GV followup
..So, the % of completion method must mean they can recognize revenue upon the completion of certain milestones.....even if the apartments won't be completed and delivered until 2007...
Exactly. If there is a firm earnest money (10% down would do that) and they have a good handle on what construction costs will be, the company can elect to either recognize revenue only when the sale is closed (as CTON does for examply) or recognize revenue based on what % is completed. The second method makes more sense for larger projects like GV is doing. Otherwise, they would show losses all year to be followed by huge revenues and profits in the period it is completed and closed. For example, when the building is framed and roofed, they could probably recognize about 1/3 of the revenue for the units that are pending sales (about 2/3 of the units in Pineapple House are pending sale per the company). Another 1/3 might be recognized once the exterior is done and the interior is sheetrocked and painted and ready for interior trim. And so on...
