Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2021

Accounting Policies [Abstract]

Organization

Organization

Presidential Realty Corporation (“Presidential” or the “Company”) is operated as a self-administrated, self-managed Real Estate Investment Trust (“REIT”). The Company is engaged principally in the ownership of income producing real estate. Presidential operates in a single business segment, investments in real estate related assets.

Basis of Presentation

Basis of Presentation

At December 31, 2021, the Company had a loss from operations. This combined with a history of operating losses and working capital deficiency, has been detrimental to our operations and could potentially affect our ability to meet our obligations and continue as a going concern. Our ability to continue as a going concern is dependent upon the successful execution of strategies to achieve profitability and increase working capital by raising debt and/or equity. The accompanying financial statements do not include any adjustments that may result from this uncertainty.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results.

Real Estate

Real Estate

Real estate is stated at cost. Generally, depreciation is provided on the straight-line method over the assets estimated useful lives, which range from twenty to thirty-nine years for buildings and improvements and from three to ten years for furniture and equipment. Maintenance and repairs are charged to operations as incurred and renewals and replacements are capitalized. The Company reviews each of its property investments for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment of properties is determined to exist when estimated amounts recoverable through future operations on an undiscounted basis are below the properties carrying value. If a property is determined to be impaired, it is written down to its estimated fair value. As of December 31, 2021, and 2020, the Company did not identify any indicators of impairment.

Principles of Consolidation

Principles of Consolidation

The Company consolidates variable interest entities (VIEs) for which it is the primary beneficiary, generally as a result of having the power to direct the activities that most significantly affect the VIE’s economic performance and holding variable interest that convey to the Company the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The accompanying consolidated financial statements include the accounts of Presidential Realty Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Investments in Joint Venture

Investments in Joint Venture

The Company has an equity investment in a joint venture and accounts for this investment using the fair value method of accounting.

Revenue Recognition

Revenue Recognition

Rental revenues include revenues from the leasing of space at our Mapletree Property, which primarily consist of monthly base rents in addition to the reimbursement of utilities. Other rental revenues, which are included as a component of rental revenue, primarily include fees related to build-out or other services performed by the Company on the property.

Revenue Recognition (continued)

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606) effective January 1, 2018, and its adoption did not have a material effect on the consolidated financial statements, as the majority of the Company’s revenue is recognized under ASC 840, Leases, and subsequently ASC 842, Leases, upon its adoption, which are scoped out of ASC 606. ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contract with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. The Company’s other rental revenues recognized in accordance with ASC 606 are recognized over time as the performance obligations are satisfied. Such revenues are not material to the consolidated financial statements.

The Company adopted ASU 2016-02, Leases (ASC 842) effective January 1, 2019, and its adoption did not have a material effect on the consolidated financial statements. As a lessor, the adoption of ASU 2016-02 (as amended by subsequent ASUs) did not change the timing of revenue recognition of the Company’s rental revenues. Revenues from the leasing of space at our property to tenants includes (i) lease components, including fixed and variable lease payments, and nonlease components which include reimbursement of electric expense and (ii) reimbursement of real estate taxes. As lessor, we have elected to combine the lease and nonlease components of our operating lease agreements and account for the components as a single lease component in accordance with ASC 842.

Revenues derived from fixed lease payments are recognized on a straight-line basis over the non-cancelable period of the lease, together with renewal options that are reasonably certain of being exercised. We commence rental revenue recognition when the underlying asset is available for use by the lessee. Revenue derived from the reimbursement of real estate taxes and electric expense are generally recognized in the same period as the related expenses are incurred, which did not change as a result of the adoption of ASC 842.

The Company assess the collectability of lease receivables (including future minimum rental payments) both at commencement and throughout the lease term. If our assessment of collectability changes during the lease term, any difference between the revenue that would have been received under the straight-line method and the lease payments that have been collected will be recognized as a current period adjustment to rental revenue. Rental revenue associated with leases where collectability has been deemed less than probable is recognized on a cash basis in accordance with ASC 842.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company assesses the collectability of amounts due from tenants and other receivables, using indicators such as past-due accounts, the nature and age of the receivable, the payment history and the ability of the tenant or debtor to meet its payment obligations. Management’s estimate of allowances for doubtful accounts is subject to revision as these factors change. Any subsequent recovery of tenant receivable that were previously reserved is recorded as a reduction in the allowance of bad debt. As of December 31, 2021 and 2020, the allowance relating to tenant receivables was $6,235 and $6,764, respectively.

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Basic net income (loss) per share data is computed by dividing net income (loss) by the weighted average number of shares of Class A and Class B common stock outstanding (excluding non-vested shares) during each period. Diluted net income (loss) per share is computed by dividing net income by the weighted average shares outstanding, including the dilutive effect, if any, of non-vested shares. For the years ended December 31, 2021 and 2020 the weighted average shares outstanding as used in the calculation of diluted loss per share do not include 550,000, of outstanding stock options, as their inclusion would be antidilutive.

Cash and cash equivalents

Cash and cash equivalents

Cash includes cash on hand, cash in banks and cash in money market funds. Cash equivalents represent short-term, highly liquid investment which are readily convertible to cash and have maturities of three months or less

Management Estimates

Management Estimates

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of income and expense for the reporting period. Actual results could differ from those estimates.

Accounting for Stock Awards

Accounting for Stock Awards

The Company recognizes the cost of employee and non-employee services received in exchange for awards of equity instruments as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the fair value of the stock award and options, is recognized as an expense, less expected forfeitures, over the requisite service period, which typically equals the vesting period. Stock-based compensation expense for the years ended December 31, 2021 and 2020 was $0.

Accounting for Income Taxes

Accounting for Income Taxes

The Company accounts for income taxes utilizing the asset and liability approach requiring the recognition of deferred tax assets and liabilities for the expected future tax consequences of net operating loss carryforwards and temporary differences between the basis of assets and liabilities for financial reporting purposes and tax purposes and for net operating loss and other carryforwards. A valuation allowance is provided for deferred tax assets based on the likelihood of realization.

The Company recognizes the benefit of an uncertain tax position that it has taken or expect to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

The Company operates in multiple tax jurisdictions within the United States of America. The Company remains subject to examination in all tax jurisdiction until the applicable statutes of limitation expire. As of December 31, 2021, the tax years after 2018 remain subject to examination. The Company did not record unrecognized tax positions for the years ended December 31, 2021 and 2020

Mortgage costs

Mortgage costs

The Company amortizes mortgage costs over the life of the loan.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires immediate recognition of management’s estimates of current expected credit losses (“CECL”). Under the prior model, losses were recognized only as they were incurred. The new model is applicable to all financial instruments that are not accounted for at fair value through net income. The standard is effective for fiscal years beginning after December 15, 2022 for public entities qualifying as smaller reporting companies. Early adoption is permitted. The Company is currently assessing the impact of this update on the consolidated financial statements and does not expect a material impact on the consolidated financial statements.