Public Storage 2003 Annual Report Download - page 88

PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
F-9
With respect to goodwill, we evaluate impairment annually through a two-step process. In the first
step, if the fair value of the reporting unit to which the goodwill applies is equal to or greater than the carrying
amount of the assets of the reporting unit, including the goodwill, the goodwill is considered unimpaired and the
second step is unnecessary. If, however, the fair value of the reporting unit is less than the carrying amount, the
second step is performed. In this test, we compute the implied fair value of the goodwill based upon the
allocations that would be made to the goodwill, other assets and liabilities of the reporting unit if a business
combination transaction were consummated at the fair value of the reporting unit. An impairment loss is
recorded to the extent that the implied fair value of the goodwill is less than the goodwills carrying amount.
No impairments of our goodwill were identified in our annual evaluations at December 31, 2003 and December
31, 2002.
With respect to other long-lived assets, we evaluate such assets on a quarterly basis. We first evaluate
these assets for indicators of impairment such as a) a significant decrease in the market price of a long-lived
asset, b) a significant adverse change in the extent or manner in which a long-lived asset is being used or in its
physical condition, c) a significant adverse change in legal factors or the business climate that could affect the
value of the long-lived asset, d) an accumulation of costs significantly in excess of the amount originally
projected for the acquisition or construction of the long-lived asset, or e) a current-period operating or cash flow
loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates
continuing losses associated with the use of the long-lived asset. When any such indicators of impairment are
noted, we compare the carrying value of these assets to the future estimated undiscounted cash flows
attributable to these assets. If the assets recoverable amount is less than the carrying value of the asset, then an
impairment charge is booked for the excess of carrying value over the assets fair value.
Any long-lived assets which we expect to sell or dispose of prior to their previously estimated useful
life are stated at the lower of their estimated net realizable value (less cost to sell) or their carrying value.
Impairments were identified with respect to our long-lived assets associated with our Discontinued
Operations as described further in Note 4. In addition, an impairment charge in the amount of $420,000 was
recorded in the year ended December 31, 2002 relating to trucks and other equipment of the continuing
containerized storage business. No other impairments were identified.
Accounting for Stock-Based Compensation
We utilize the Fair Value Method of accounting for our employee stock options issued after December
31, 2001, and utilize the APB 25 Method for employee stock options issued prior to January 1, 2002. Restricted
Stock Unit expense is recorded over the relevant vesting period. See Note 12 for a full discussion of our
accounting with respect to employee stock options and restricted stock units.
Other assets
Other assets primarily consist of containers and equipment associated with the containerized storage
operations, assets associated with the truck rental business, accounts receivable, and prepaid expenses.
Accounts receivable due from tenants are net of allowances for estimated doubtful accounts.
Containers and equipment utilized in our containerized storage business totaled $10,895,000 and
$20,275,000 at December 31, 2003 and 2002, respectively. The carrying amounts are net of accumulated
depreciation and asset impairment charges. As discussed in Note 4, during 2003 and 2002 impairment charges
amounting to $2,479,000 and $6,504,000, respectively, were recorded with respect to containers and equipment
utilized in the discontinued containerized storage operations. In addition, during 2002, an impairment charge of
$420,000 was recorded with respect to assets used in the continuing containerized storage operations.