Company: KBSR
Filing Date: 2025-03-14
Form Type: 10-K
Source: 0001482430-25-000021
Chunk: 47

Company: KBS Real Estate Investment Trust III, Inc.
Filing Date: 2025-03-14
Form: 10-K
Item: Item 15
Chunk 47
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 statement of operations.  In addition, the Company adopted the practical expedient available under Topic 842 to not separate nonlease components from the associated lease component and instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met, specifically related to tenant reimbursements for common area maintenance which would otherwise be accounted for under the revenue recognition standard.  The Company believes the two conditions have been met for tenant reimbursements for common area maintenance as (i) the timing and pattern of transfer of the nonlease components and associated lease components are the same and (ii) the lease component would be classified as an operating lease.  Accordingly, tenant reimbursements for common area maintenance are also accounted for as variable lease payments and recorded as rental income on the Company’s statement of operations.  In accordance with Topic 842, the Company makes a determination of whether the collectibility of the lease payments in an operating lease is probable.  If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only to the extent cash has been received.  These changes to the Company’s collectibility assessment are reflected as an adjustment to rental income.The Company, as a lessor, records costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as legal costs incurred to negotiate an operating lease, as an expense and classifies such costs as operating, maintenance, and management expense on the Company’s consolidated statement of operations, as these costs are not capitalizable under the definition of initial direct costs under Topic 842.  Sales of Real EstateThe Company follows the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business.  Generally, the Company’s sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610-20.  

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Table of ContentsKBS REAL ESTATE INVESTMENT TRUST III, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)December 31, 20243.      SUMMARY OF SIGNIFICANT ACCOUNTING POL