[Question] Accounting for rental guarantees in property development?

[Edrich]

How do you go about recognizing rental guarantees in a property development (specifically a sectional title scheme) out of the view point of the developer? Is it a financial liability? Is it a marketing asset? Furthermore how do you value the rental guarantee contracts before it's paid out? During the time it's being paid out? What impact will it have on the valuation of your property?

[geraldenek]

does the property developer keep the properties as inventory / investment property?

does he use the rental guarantee to better market it to buyers?

[Dave A]

My first question would be - are funds specifically set aside to cover any possible claim?

If not, this probably should be reported in similar manner to sureties - a note of potential liability in the financial statements.

ps. Guarantee is such an abused term, isn't it. If there is no security, it isn't a guarantee.