Speaker Bios
Brian Ruben
Partner
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
312-486-4180
bruben@deloitte.com
Brian has over 19 years of public accounting
experience serving real estate clients ranging from
small private companies to publicly traded and
multinational clients.
He leads our national non-listed REIT practice and is a
member of our U.S. Real Estate leadership team. Brian
has significant experience serving real estate REITs
(publicly traded, non-listed, private), partnerships,
investment managers, property managers, institutional
advisors, developers, homebuilders, and public pension
advisors. He has substantial experience in fund
formation, fair value accounting, IFRS, Securities and
Exchange Commission matters, mergers and
acquisitions services, and accounting and tax
consultations. He has participated in numerous
financing transactions, including public stock and debt
offerings.
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Brian currently serves as the Midwest real estate
industry learning leader for the audit practice and
was co-author to two point of view articles entitled
“What is the value of my real estate?” and
“Financial institutions: converting commercial
mortgages to REO-valuation and accounting
considerations.”
Representative Clients Served:
•  AMLI Residential Properties
•  Blackstone
•  EPN Investment Management
•  General Growth Properties, Inc.
•  JLL/LaSalle Investment Management
•  MASSPRIM
•  Miller Capital Advisory
•  Morgan Stanley
•  Phillips Edison – ARC Shopping Center REIT
Inc.
•  Retail Properties of America, Inc.
•  Weingarten Realty Investors
Speaker Bios
Patrick Scheibel
Senior Manager
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
312-486-0854
pscheibel@deloitte.com
Patrick has over nine years of public accounting experience. In Chicago, Patrick serves primarily real estate
clients, most notably General Growth Properties, Inc., Retail Properties of America, Inc, and Pearlmark Real
Estate Partners. Patrick is also actively involved in Deloitte’s national real estate practice, helping to lead
practice-wide calls and webcasts on real estate-related matters.
Prior to moving to Chicago in June 2012, Patrick was on assignment in Deloitte’s National Office, working
with Deloitte’s real estate industry Professional Practice Director, Chris Dubrowski. In this role, Patrick
served as a National Office subject matter resource for all industry related accounting and auditing
consultations, developed content for and spoke at real estate industry conferences, assisted in the
development of industry related accounting publications, and participated in the quality review of several of
our largest real estate clients.
Representative Clients Served:
•  Cole Credit Property Trust
•  General Growth Properties, Inc.
•  HCP, Inc.
•  Morgan Stanley
Copyright © 2013 Deloitte Development LLC. All rights reserved.
•
•
•
•
Pearlmark Real Estate Partners
Retail Properties of America, Inc.
Starwood Realty Trust
Vornado
Agenda
Standards Setting
FASB Projects
SEC Comments on Real Estate Companies
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3
Disclaimer
•  This presentation does not provide official Deloitte & Touche LLP
interpretive accounting guidance
•  The views expressed are solely those of the presenter and are not
formal Deloitte & Touche LLP positions
•  Check with a qualified advisor before taking any action
•  See slides at the end for additional resources available on these topics
Copyright © 2013 Deloitte Development LLC. All rights reserved.
4
Standards Setting
Where are we at and where are we going?
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Convergence Challenges
Public Feedback on Incorporating IFRS
Consistent views
Divergent views
•  Largely supportive of the
SEC’s approach and IFRS
as the single global
accounting standard
•  Single date verses
staggered adoption
•  Strong FASB role
•  Retrospective or
prospective adoption of new
standards
•  Retaining US GAAP
reference to ease
contractual and regulatory
burdens
•  Establish criteria or
threshold for modifications
from IFRS
•  Adoption timetable
•  Option to early adopt
Concerns raised
•  Inconsistent interpretation
and enforcement by
regulators/auditors
•  IASB independence,
funding and due process
•  Reluctance of IASB to issue
interpretative guidance
•  Impact on specialized
industry guidance with no
IFRS equivalent
•  Smaller registrants
concerned with resources
and cost
•  Litigation risks should be
evaluated
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6
Project Timeline: Joint Projects
Expected date
Projects
Converged?
Leases
2012
2013
Partially
E
Revenue Recognition
Yes
FF/FI
Financial instruments:
•  Impairment
No
E
Partially
E
•  Hedge accounting — General (IASB)
N/A
RD/FI
•  Hedge accounting — Macro (IASB)
N/A
E
Investment Companies/Entities
No
FI
•  Classification and Measurement
Consolidation (IASB standard issued in 2011)
E — Exposure Draft
RD — Review Draft
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FF — Final FASB
Partially
FF
FF
FI — Final IASB
7
FASB — only Projects
Expected date
2011
2012
H1
Projects
Financial Instruments: Liquidity & Interest Rate
Disclosures
E (June)
Liquidation Basis of Accounting
E (July)
2013
H2
Going Concern
E
Transfers and Servicing: Repurchase
Agreements
E
Investment Property Entities (IPE)
E (Oct)
O
Definition of a Nonpublic Entity
D (July)
Disclosure Framework
D (July)
E — Exposure Draft
Final — Final Standard
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D – Discussion Memo
H1
O – On Hold
8
FASB Done Deals
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Fair Value Measurement
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Fair Value Measurement
•  Final standard (ASU 2011-04) issued May 12, 2011
–  Effective dates (calendar year-end entities):
•  Public entities: Q1 2012
•  Non-public entities: Year end 2012
•  Primary objective:
–  Align the words in US GAAP and IFRS
•  Secondary objectives to:
–  Clarify and refine the measurement principles in Topic 820, and
–  Expand disclosure requirements (of course!)
•  The ASU does not change:
–  When fair value measurements are required or permitted
–  The fundamental fair value measurement principles
–  Exit price
–  Market participant viewpoint
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11
Fair Value Disclosure Requirements
Before
After
Transfers
between Level 1
and Level 2
Only significant transfers
were required
•  All transfers should be
disclosed
Highest and best
use of a nonfinancial asset
differs from its
current use
No requirement to disclose
situations when an entity’s
current use of an asset
differs from its highest and
best use
Disclosure is now required
Fair value
measurements
that are only
disclosed
(e.g. FV of debt)
No requirement to provide
the level in the fair value
hierarchy
•  Must disclose the level in
the fair value hierarchy
•  Amended to not be required
for non-public entities
•  Not required for non-public
entities
12
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Fair Value Disclosure Requirements (cont.)
New Level 3
disclosure
requirements
Before
After
•  No requirement to disclose
quantitative information
about inputs
•  Required to disclose
quantitative information
about inputs (e.g. cap rates,
discount rates, market rent
assumptions, etc…)
•  No requirement to disclose
a description of the
valuation process used by
the entity
•  Required to disclose a
description of the valuation
process used by the entity
•  No requirement to describe •  Required to provide a
the sensitivity of Level 3
narrative description of the
inputs or any related
sensitivity and any related
interrelationships
interrelationships
(not required for non-public
entities)
13
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Valuation Process – Implementation Guidance
•  Information about the
group responsible for
the reporting entity’s
valuation policies and
procedures:
I.  Its description
II. To whom that group
reports
III. The internal reporting
procedures in place
•  The frequency and
methods for calibration,
back testing, and other
testing procedures of
pricing models
•  The process for
analyzing changes in
fair value
measurements from
period to period
•  How the reporting entity
determined that thirdparty information, such
as broker quotes or
pricing services, used in
the fair value
measurement was
developed in
accordance with Topic
820
•  The methods used to
develop and
substantiate the
unobservable inputs
used in a fair value
measurement
14
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Disclosure of Inputs for Level 3 FV Measurements
Property Type
Fair Value
Valuation
Technique(s)
Unobservable
Inputs
Ranges (Weighted
Average)
Discounted
cash flows
(DCF)
Discount rate
12.1% to 24.3%
(14.6%)
Capitalization rate
3.4% to 10.7%
(6.9%)
10 years (10 years)
Real Estate
Properties:
Residential
$
259,670,000
DCF term (years)
Direct
capitalization
method
Office
$
89,323,000
Discounted
cash flows
Revenue growth
rate
Direct cap rate
Discount rate
Capitalization rate
DCF term (years)
Revenue growth
rate
0% to 11.2% (4.1%)
5.5% to 9.1% (7.5%)
9.5% to 21.2%
(12.3%)
3.0% to 12.1%
(5.4%)
10 years (8 years)
1.1% to 8.4% (6.1%)
15
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FASB Projects Impacting the Real Estate
Industry
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Investment Property Entities
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FASB Investment Properties Project
•  IAS 40 gives option to carry investment properties at FV through
income
•  FASB’s original thinking (summer of 2010):
– Convergence would be nice, so
– Let’s issue guidance similar to IAS 40 (asset- based scope), but
– Make it a requirement, not an option
•  Significant pushback from non-real estate companies holding
investment properties
•  Guidance as proposed:
– Scope was entity based, not asset based
– “Investment Property Entities” own investment property, carry at FV
– Modeled off the current definition of an investment company
18
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Update on FASB Investment Properties Project
•  In August 2012, the Board decided that it would not continue to
develop the investment property entity concept
•  Rather, once it completes certain other related projects, the Board will
decide whether to pursue an asset-based approach for measuring
investment properties that is similar to the approach in IAS 40,
Investment Property
•  If the Board decides to pursue such an approach, it would then decide
whether fair value measurement should be an option or a requirement
19
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Investment Companies/
Entities
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Overview
•  Joint project to provide comprehensive guidance for assessing whether
an entity is an “investment company/entity” for accounting purposes
•  Has nothing to do with regulatory classification (e.g. 1940 Act)
•  Will amend definition, provide measurement requirements and additional
disclosures
•  Exposure draft issued October 21, 2011
(in conjunction with the investment property entity exposure draft)
•  IASB issued final guidance October 2012, effective January 1, 2014
•  FASB expected issuance first half of 2013
21
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Definition and typical characteristics of an investment
company
Required Attributes
Obtains funds from an
investor(s) and provides
professional investment
management service
Business purposes &
substantive activities are to
invest funds for returns from
capital appreciation,
investment income, or both
Investment
Company
Additional
characteristics
(Not required to
meet all of these
criteria)
Multiple
investments
Multiple
investors
Unrelated
investors
Do not obtain benefits from
their investments that are
either:
•  Other than capital
appreciation or investment
income
•  Not available to other
noninvestors / not normally
attributable to ownership
interests
Equity or
partnership
interests
Manages and
evaluates its
investments on a
fair value basis
22
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Latest Update on Project
•  The FASB decided that the project will be now in two phases
•  Phase 1
–  Issuance of the revised definition and certain disclosure requirements.
–  Retains the REIT scope exception
•  All REITs (Equity REITs and Mortgage REITs) will be scoped out of the
revised definition.
•  Phase 2
–  Separate project to evaluate accounting for investments in real estate in the
context of investment companies.
•  Convergence issue
–  Non-investment company parent accounting for its investment in an
investment company.
•  US GAAP – retain fair value accounting
•  IFRS – consolidate all subsidiaries, impose parent company accounting.
23
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Leases
24
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Lease Project Timeline
Original Exposure Draft (ED)
Comment period ended
December 2010
Issued in August 2010
Over 750 letters received
Redeliberations
Revised ED expected 1st Quarter of 2013
Final Standard
Expected to be issued 2013
Effective Date
Expected to be no sooner than 2016
25
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Lessee Accounting
“Right-of-use” (ROU) model
ROU asset
Initial
measurement •  PV of lease payments + lessee’s initial direct costs
Lease liability
•  PV of lease payments
•  Discount rate: Rate lessor is charging lessee if readily available; otherwise,
lessee’s incremental borrowing rate
ROU asset
Subsequent
measurement •  Amortized cost: Method of amortization depends on nature of underlying asset
(see slides that follow)
•  Impairment: Refer to existing standards (ASC 360, IAS 36)
Lease liability
•  Amortized cost: effective interest method
26
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Lessee Accounting
ROU model’s income statement effect
Constituents’
concern about
income statement
effect being
inconsistent with
lease economics
27
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Lessee Accounting
Expense recognition
A lessee’s determination of the appropriate expense recognition pattern
would be based on whether the lessee acquires and consumes more
than an insignificant portion of the underlying asset
Yes
Is the leased asset
“property”?
Lease term a major portion
of asset economic life OR
PV of fixed lease payments
accounts for substantially all
of the FV
Yes
Financing Approach
No
Straight-line
Approach
No
Lease term is insignificant to
asset economic life OR PV
of fixed lease payments
insignificant relative to asset
FV?
Yes
Straight-line
Approach
No
Financing Approach
28
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Two Subsequent Measurement Models for Lessees
29
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Lessors of Real Estate…The Journey Continues
New
Property and Leases with
'Insignificant Consumption'
Scope Out from R&R
FAS 13 - Operating Lease
Accounting
November 1976
Tenative Decision:
July 2012
Performance Obligation
Investment Property
Scoped Out from R&R
Exposure Draft
(August 2010)
Tenative Decision:
October 2011
"Other Than Financing"
Model
Receivable and Residual
("R&R")
Tenative Decision:
March 2011
Tenative Decision:
July 2011
30
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Lessor Accounting
Receivable/Residual
method or operating lease
A lessor’s determination of the appropriate expense recognition pattern
would be based on whether the lessee acquires and consumes more
than an insignificant portion of the underlying asset
Yes
Is the leased asset
“property”?
Lease term a major portion
of asset economic life OR
PV of fixed lease
payments accounts for
substantially all of the FV?
Yes
Receivable/
Residual
Method
No
Operating Lease
No
Lease term is insignificant
to asset economic life OR
PV of fixed lease
payments insignificant
relative to asset FV?
Yes
Operating Lease
No
Receivable/
Residual
Method
31
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The Receivable and Residual Approach
•  Similar to lessee model
Derecognize
underlying
asset
Replace with:
Receivable (PV
of lease
payments)
Residual asset
Upfront profit
32
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Revenue Recognition
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Timeline and Recent Developments
Month/Year
Milestone
June 2010
Initial exposure draft issued
June 2011
Final decision by Boards to re-expose
Q4 2011
Issued revised exposure draft on 11/14/2011
with a 120 day comment period
Q4 2011 – Q1 2012
Perform outreach activities
Q1 2012 – Q4 2012
•
Evaluate feedback, perform public outreach,
and finalize redeliberations
First half 2013
Finalized revenue standard anticipated
•  Effective date:
–  Public Companies: No earlier than January 1, 2015
–  Non-public companies: One year later than public companies (January 1, 2016)
–  Full retrospective application may be required
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34
Key Concepts in the Exposure Draft
Transfer of Control
Performance
Obligations
One Size
Fits
All
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Question:
Can a “one size fits
all model” work for
everyone?
35
Core Principle and Steps in the Model
•  Core principle:
–  Recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration the entity expects to
be entitled in exchange for those goods or services
Step 1
Step 2
Step 3
Step 4
Step 5
Identify the contract with a customer
Identify the separate performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the separate performance
obligations
Recognize revenue when (or as) the entity satisfies a
performance obligation
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36
Potential Effects on Real Estate
Elimination of bright-line tests
•  Can we look to the old (industry specific) rules to supplement the new
rules?
–  The board would not expect…accounting firms to be developing guidance
based on old…GAAP to supplement the new [revenue recognition] standard.
Leslie Seidman, FASB Chairman
•  Prescriptive guidance provided by ASC 360-20 (Sales of Real Estate)
and ASC 605 (Construction) will be lost:
–
–
–
–
Buyer’s financial commitment
Collectability of transaction price
Continuing involvement by seller
Sales to limited partnerships/joint ventures
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- Guarantee buyer return
- Partial sales
- Condominium sales
- Sale-leaseback transactions
37
Potential Effects on Real Estate
Elimination of bright-line tests
•  Has the buyer made an adequate initial and continuing investment?
•  Are you reasonably assured that the buyer is committed and will pay?
•  Use of judgment when evaluating continuing involvement
–  Continuing involvement is replaced with transfer of control and separate
performance obligations
–  Identify performance obligations (liabilities): property management services,
commitments to support operations, development commitments
•  Allocate revenue to each of the performance obligations; recognize revenue
when performance obligations are completed
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38
Potential Effects on Real Estate
Use of judgment and reduced emphasis on collectibility
How will this change conclusions related to real estate transactions?
•  Will likely result in more transactions qualifying as sales of real estate with
gains being accelerated
–  Transactions that include contingent proceeds (often considered continuing
involvement) may qualify for sales recognition
Example 1 – participation in future profits from a sold property if reasonably
assured to be entitled
Example 2 – guarantees of certain future operating levels by the seller would
not preclude sales recognition. Account for portion of sales proceeds
separately
•  Collectibility would affect the amount of gain or loss, not recognition, of
revenue
–  Boards still analyzing approaches to accounting for buyer credit risk
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39
Consolidation – Principal vs.
Agent
FASB Principal vs. Agent: Overview
•  Contains a single model for qualitatively assessing whether a decision
maker (or general partner) is a principal or agent of the other
stakeholders
•  When assessing whether the reporting entity has “the power to direct the
most significant activities of the VIE that most impact the VIE’s economic
performance” in ASC 810, the reporting entity would need to evaluate its
decision-making authority as a principal or an agent.
•  Proposal would revise the definitions of “participating rights” and “kickout rights” and would align the analysis of theses rights under variable
interest entities, voting interest entities, and partnership models
•  Would eliminate the deferral from Statement 167 for certain investment
fund advisors
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41
FASB Principal vs. Agent: Factors to Consider
•  Rights held by other parties (including kick-out and participating rights)
–  Substantive participating rights held by other parties are an indicator
that the decision maker is an agent
–  Substantive kick-out rights held by a single party would be conclusive
decision maker is an agent
–  Removal rights requiring the agreement of multiple parties (including
BOD) may still be considered substantive but would not, in isolation,
allow a general partner to conclude that it is an agent of the limited
partners.
–  As number of multiple parties required to come together to exercise
removal rights increases, the likelihood that those rights would be
substantive decreases
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42
FASB Principal vs. Agent: Factors to Consider
•  The decision maker’s compensation
–  Is the compensation of the decision maker commensurate with the
services provided?
•  Exposure to variability in returns from other interests (including rights
held by related parties)
–  Magnitude and variability associated with the decision maker’s
economic interests (e.g., investments and guarantees)
–  Is there exposure to both positive and negative returns?
•  An interest that only exposes the decision maker to positive returns
would be less indicative of a principal relationship
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43
Other Pending FASB Projects
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44
Classification and Measurement of Financial Instruments
Financial
assets –
Assess cash
flows
Financial
liabilities –
Amortized
cost*
SPPI
Not SPPI
* With certain
exceptions
Assess
business
model
Held to collect:
Hold & sell:
Amortized cost
FV-OCI
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SPPI =
Solely payments of
principal and interest
FV-NI (residual)
Do not assess
business
model
FV-NI
45
Liquidity and Interest Rate Risk Disclosures
•  Scope:
–  All entities to provide footnote disclosures about liquidity risk, and
–  Only “financial institutions” (including mortgage REITS) required to provide
disclosures about interest rate risk
•  Qualitative Disclosures
–  The exposure to risks and how they arise
–  Objectives, policies, and processes for managing risks and the methods
used to measure the risks
•  Quantitative Disclosures
–  Cash flow obligations table
–  Available liquid funds
–  Interest rate sensitivity
Is this stuff going to be auditable?
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46
Discontinued operations
•  Project objective
–  To improve the definition and reporting of discontinued operations
–  Converges with IFRS
•  Raises the threshold for reporting disc ops
–  The component or group of components is part of a single coordinated plan
to dispose of a separate major line of business, or
–  A separate major geographical area of operations
•  Timing
–  Exposure draft issued on April 2, 2013
–  Excellent news for real estate companies
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47
Liquidation Basis of Accounting and Going Concern
Phase I: Liquidation Basis of Accounting
•  Purpose: Determine how and when an entity should apply the liquidation basis
of accounting
•  Conclusion: Prepare financial statements on the going concern basis unless
liquidation is imminent
•  When an entity’s liquidation are consistent with those "contemplated in the
entity's governing documents,” a limited-life entity (like a real estate fund)
should not use the liquidation basis of accounting
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48
The Liquidation Basis of Accounting and Going Concern
Phase II: Going Concern
•  January 11, 2012, the Board tentatively decided not to require management
to perform a going-concern assessment
•  May 2, 2012:
–  FASB decided to start a new project to revisit a requirement for management
to assess an entity’s ability to continue as a going concern
–  The Board will consider feedback received during redeliberations on the
liquidation basis of accounting
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49
Small GAAP vs. Big GAAP
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Private Company Council
•  In May 2012 the FAF (FASB’s parent foundation) decided to establish a
Private Company Council (PCC)
–  The FAF trustees will appoint 9 to 12 members to the PCC
–  Board members must have private company experience and will represent
various groups, including users, preparers, and auditors
•  Responsibilities of the PCC:
–  Advise the FASB on how private companies should treat current pending
projects
–  Determine whether exceptions or modifications to existing U.S. GAAP would
benefit private company financial statement users
•  The FASB still has the final say
–  All exceptions and modifications proposed by the PCC would be subject to
FASB ratification
–  This is similar to how the EITF functions
51
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AICPA’s Financial Reporting Framework for Small and
Medium-Sized Entities
Stakeholders of smaller entities looking for an alternative to GAAP that is
less complicated and costly
Highlights:
–
–
–
–
–
–
Far fewer items reported at fair value
No items of other comprehensive income
Goodwill and intangibles are amortized
Impairment losses can be reversed
Can elect proportional consolidation, equity or cost method for joint ventures
Follow GAAP for transactions not addressed, or choose accounting not
contemplated in any existing framework
–  Will likely result in diversity in practice, even in the same industry
This is not GAAP and would not be used if planning public offering
Exposure draft issued November 1, 2012 for comments
52
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SEC Comments on Real Estate
Companies
MD&A Best Practices
•  Use “plain English” and tables; avoid jargon whenever possible
•  Describe only key changes in an overview section; avoid
background information
•  Focus on matters that are likely to have a material impact
•  Monitor competitors’ disclosures and any associated SEC staff
comments
•  Ensure that the question “why” is answered; “tell your story”
•  Avoid boilerplate risk factors
•  Evaluate whether multiple factors are driving a change and
quantify each factor
•  Consider year-over-year comparison tables
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54
Non-GAAP Measures
“We note your use of Core FFO within your earnings release. Please
tell us whether management considers Core FFO to be a key
performance indicator. If so, please include the disclosure of Core
FFO within your next periodic report, providing the required
disclosures pursuant to Item 10(e) of Regulation S-K.”
“Please clarify that you use the NAREIT definition of FFO.”
“We note your reference to an increase in same-property NOI. Please
revise your disclosure to disclose in detail how same-property NOI is
defined.”
Copyright © 2013 Deloitte Development LLC. All rights reserved.
55
Lease Expirations and Leasing and Rental Trends
“In future periodic reports, for your retail and office properties, please
provide a schedule of lease expirations for each of the ten years,
starting with the current or next fiscal year, that includes the number of
tenants or leases that will expire, the total area in square feet covered
by such leases, annual rental represented by the expiring leases and
the percentage of gross annual rental represented by such leases.”
“We note that you disclose average rental rate per unit and average
base rent per leased square foot. In future periodic filings, please
include disclosure that clarifies how these amounts are calculated.”
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56
Development Activity
“We note your disclosure regarding your future development activity.
To the extent that your future development activity is material, please
disclose the anticipated completion date and budgeted costs for such
activity…”
“…In future filings please expand your disclosure in MD&A to include
additional analysis of your capital expenditures breaking them down
between new development, redevelopment/renovations, and other
capital expenditures by year…”
“Please disclose the cash outflows from real estate acquisitions,
development, and lease costs separately for each year presented in
your statement of cash flows.”
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57
Capitalization Period
“We note that you capitalize development costs incurred during the
construction period. Please tell us and expand disclosures in future
periodic filings to discuss when this construction period begins and
ends.”
“We note that you have disclosed that construction and carrying costs
are capitalized until the apartment homes are substantially completed.
Please tell us, and disclose as part of your significant accounting
policies and critical accounting policies in future filings, when the
capitalization period begins and how that is determined.”
Copyright © 2013 Deloitte Development LLC. All rights reserved.
58
Acquisition Costs – Geography
“We note your response to comment … in our letter dated … relating
to the presentation of acquisition costs below real estate operating
income. Given the nature of your business and your history of making
acquisitions we continue to believe that the presentation of acquisition
costs in real estate operating income is appropriate. Please revise
your presentation in future filings.”
Copyright © 2013 Deloitte Development LLC. All rights reserved.
59
Held For Sale Criteria
“We note that you sold XX properties during the first quarter and that
you have concluded that the properties did not meet the criteria to be
classified as held for sale as of December 31, XX. Please explain to us
in further detail how you determined that these properties did not meet
the held for sale criteria at year end. Tell us the operating income for
these properties that would have been classified as discontinued
operations if the properties had been classified as held for sale.”
Copyright © 2013 Deloitte Development LLC. All rights reserved.
60
Consolidation
“We note that you have a 51% ownership in an unconsolidated real
estate limited partnership. Please tell us how you determined that this
partnership should not be consolidated.”
“You disclose you have an 83.55% economic ownership of XX
Apartments, and that you account for this investment using the equity
method. Please provide us with a detailed analysis and your basis in
GAAP for using the equity method of accounting for this entity.”
Copyright © 2013 Deloitte Development LLC. All rights reserved.
61
Loss Contingencies
“We note that XX has claimed damages of at least $YY million against
you, plus attorney’s fees. It is not clear whether $YY million
represents your best estimate of reasonably possible loss, or the low
end of a range of reasonably possible loss. Please revise your
disclosure to disclose the range of reasonably possible loss in excess
of amounts accrued, or a statement that such an estimate cannot be
made.”
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62
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63
About this presentation
This presentation contains general information only and Deloitte is not, by means of this presentation,
rendering accounting, business, financial, investment, legal, tax, or other professional advice or services.
This presentation is not a substitute for such professional advice or services, nor should it be used as a
basis for any decision or action that may affect your business. Before making any decision or taking any
action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not
be responsible for any loss sustained by any person who relies on this presentation.
Copyright © 2013 Deloitte Development LLC. All rights reserved.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of
which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche
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subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
.Copyright © 2013 Deloitte Development LLC. All rights reserved.