Public Storage 1999 Annual Report Download - page 21

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U B LI C T O RAG E,N C . 1999 N N UAL RE P O RT
Due to the short period to maturity of our cash and cash equivalents, accounts receivable, other assets, and accrued and other liabilities, the
carrying values as presented on the consolidated balance sheets are reasonable estimates of fair value. The carrying amount of mortgage notes
receivable approximates fair value because the aggregate mortgage notes receivable’s applicable interest rates approximate market rates for these
loans. A comparison of the carrying amount of notes payable to our estimated fair value is included in Note 7,“Notes Payable.”
Financial assets that are exposed to credit risk consist primarily of cash and cash equivalents, accounts receivable, and notes receivable. Cash
and cash equivalents, which consist of short-term investments, including commercial paper, are only invested in entities with an investment
grade rating. Notes receivable are substantially all secured by real estate facilities that we believe are valued in excess of the related note
receivable. Accounts receivable are not a significant portion of total assets and are comprised of a large number of individual customers.
Real estate facilities
Real estate facilities are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the
buildings and improvements, which are generally between 5 and 25 years.
Evaluation of asset impairment
In 1995, the Financial Accounting Standards Board issued Statement No. 121,“Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed O f” which requires impairment losses to be recorded on long-lived assets.We annually evaluate long-lived
assets (including goodwill), by identifying indicators of impairment and by comparing the sum of the estimated undiscounted future cash flows
for each asset to the asset’s carrying amount.When indicators of impairment are present and the sum of the undiscounted cash flows is less than
the carrying value of such asset, an impairment loss is recorded equal to the difference between the asset’s current carrying value and its value
based upon discounting its estimated future cash flows. Statement No. 121 also addresses the accounting for long-lived assets that are expected
to be disposed of. Such assets are to be reported at the lower of their carrying amount or fair value, less cost to sell. Our evaluations have
indicated no impairment in the carrying amount of our assets.
Other assets
Other assets primarily consist of furniture, fixtures, equipment, and other such assets associated with the portable self-storage business as well as
accounts receivable, prepaid expenses, and other such assets of the Company. Included in other assets with respect to the portable self-storage
business is furniture, fixtures, and equipment (net of accumulated depreciation) of $34,704,000 and $36,358,000 at December 31, 1999
and 1998, respectively. Included in depreciation and amortization expense is $4,915,000, $4,317,000, and $1,394,000 in the years ended
December 31, 1999, 1998, and 1997, respectively, of depreciation of furniture, fixtures, and equipment of the portable self-storage business.
Intangible assets
Intangible assets consist of property management contracts ($165,000,000) and the cost over the fair value of net tangible and identifiable
intangible assets ($67,726,000) acquired. Intangible assets are amortized straight-line over 25 years. At December 31, 1999 and 1998, intangible
assets are net of accumulated amortization of $38,400,000 and $29,091,000, respectively. Included in depreciation and amortization expense is
$9,309,000 in each of the three fiscal years ended December 31, 1999 with respect to the amortization of intangible assets.
Revenue and expense recognition
Property rents are recognized as earned. Equity in earnings of real estate entities are recognized based on our ownership interest in the earnings
of each of the unconsolidated real estate entities. Advertising costs are expensed as incurred.
Environmental costs
Our policy is to accrue environmental assessments and/ or remediation cost when it is probable that such efforts will be required and the
related costs can be reasonably estimated. O ur current practice is to conduct environmental investigations in connection with property
acquisitions. As a result of environmental investigations of our properties, which commenced in 1995, we recorded an amount which, in our
best estimate, will be sufficient to satisfy anticipated costs of known investigation and remediation requirements. Although there can be no
assurance, we are not aware of any environmental contamination of any of our facilities which individually or in the aggregate would be
material to our overall business, financial condition, or results of operations.