Public Storage 2001 Annual Report Download - page 15

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P
UBLIC S TORAGE ,I NC . 2001 A NNUAL R EPORT
Due to the short period to maturity of our cash and cash equivalents, accounts receivable, and other financial assets included in
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 applicable interest
rates approximate market rates for these loans. A comparison of the carrying amount of notes payable to their 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. Other than the $35,000,000 note receivable from PSB noted above, which was repaid
(unaudited) on January 28, 2002, notes receivable are 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. Costs associated with the acquisition, development, construction, and improvement of
properties are capitalized. Interest, property taxes, and other costs associated with development are capitalized as building cost.
Expenditures for repairs and maintenance are charged to expense when incurred. 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 Of” which requires impairment losses to be recorded on long-lived assets. We
annually evaluate long-lived assets (including intangibles), by identifying indicators of impairment and, if such indicators exist, 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 containerized storage
business as well as accounts receivable, prepaid expenses, and other such assets of the Company. Included in other assets with
respect to the containerized storage business is furniture, fixtures, and equipment (net of accumulated depreciation) of
$30,699,000 and $28,544,000 at December 31, 2001 and 2000, respectively. Included in depreciation and amortization expense
is $5,851,000, $4,801,000, and $4,915,000 in the years ended December 31, 2001, 2000 and 1999, respectively, of depreciation
of furniture, fixtures, and equipment relating to the containerized storage business.
Intangible Assets and Goodwill
Intangible assets consist of property management contracts ($165,000,000 at December 31, 2001 and 2000) and the excess of
acquisition cost over the fair value of net tangible and identifiable intangible assets or “goodwill” ($94,719,000 at December 31,
2001 and $ 67,726,000 at December 31, 2000) acquired in business combinations. Intangible assets are amortized straight-line
over 25 years. At December 31, 2001 and 2000, intangible assets are net of accumulated amortization of $57,018,000 and
$47,709,000, respectively. Included in depreciation and amortization expense is $9,309,000 in each of the three fiscal years
ended December 31, 2001 with respect to the amortization of intangible assets.
Intangible assets and goodwill increased by $26,993,000 in the year ended December 31, 2001 as a result of the acquisition
of PS Insurance Company, Ltd. (See Note 3).