Public Storage 2003 Annual Report Download - page 87

PUBLIC STORAGE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
F-8
Financial instruments
The methods and assumptions used to estimate the fair value of financial instruments is described
below. We have estimated the fair value of our financial instruments using available market information and
appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop
estimates of market value. Accordingly, estimated fair values are not necessarily indicative of the amounts that
could be realized in current market exchanges.
For purposes of financial statement presentation, we consider all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
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 notes receivable
approximates fair value because the applicable interest rates approximates market rates for these loans. Notes
receivable were all current at December 31, 2003. A comparison of the carrying amount of notes payable to
their estimated fair value is included in Note 8, 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 consist
primarily of $100.0 million due from Public Storage Business Parks (PSB) that was repaid entirely by March
11, 2004. Accounts receivable from customers are a component of other assets, and are not a significant
component of total assets.
Included in cash and cash equivalents at December 31, 2003 is $1,835,000 ($11,423,000 at December
31, 2002) held by STOR-Re Mutual Insurance Company, Inc. (STOR-Re). Insurance and other regulations
place significant restrictions on our ability to withdraw these funds for purposes other than insurance activities
(see Note 3). Other assets at December 31, 2003 includes investments totaling $27,995,000 ($13,801,000 at
December 31, 2002) in held to maturity debt securities owned by STOR-Re stated at amortized cost which
approximates fair value.
Real estate facilities
Real estate facilities are recorded at cost. Costs associated with the acquisition, development,
construction, renovation, and improvement of properties are capitalized. Interest, property taxes, and other
costs associated with development incurred during the construction period 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 August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
No. 144). In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142). We adopted both of these statements effective January 1,
2002.