Public Storage 2009 Annual Report Download - page 100

PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
F-13
Foreign Currency Exchange Translation
The local currency is the functional currency for the foreign operations for which we have an
interest. Assets and liabilities included on our consolidated balance sheets, including our equity
investment in, and our loan receivable from, Shurgard Europe, are translated at end-of-period exchange
rates, while revenues, expenses, and equity in earnings in the related real estate entities, are translated
at the average exchange rates in effect during the period. The Euro, which represents the functional
currency used by a majority of the foreign operations for which we have an interest, was translated at
an end-of-period exchange rate of approximately 1.433 U.S. Dollars per Euro at December 31, 2009
(1.409 at December 31, 2008), and average exchange rates of 1.393, 1.470 and 1.370 for the years
ended December 31, 2009, 2008 and 2007, respectively. Equity is translated at historical rates and the
resulting cumulative translation adjustments, to the extent not included in net income, are included as a
component of accumulated other comprehensive income (loss) until the translation adjustments are
realized. See “Other Comprehensive Income” below for further information regarding our foreign
currency translation gains and losses.
Fair Value Accounting
In 2006, the FASB clarified in accounting pronouncements that “fair value” as the term is
used in GAAP is an exit price, representing the amount that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants, and established a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value. The Company adopted
the provisions of these revised accounting pronouncements on January 1, 2008 with respect to
financial assets and liabilities and on January 1, 2009 with respect to non-financial assets and
liabilities. The adoption of these provisions had no effect on our financial position, operating results or
cash flows. See “Loan Receivable from Shurgard Europe” below and “Financial Instruments” above,
as well as “Redeemable Noncontrolling Interests in Subsidiaries” and “Other Permanent
Noncontrolling Interests in Subsidiaries” in Note 7 for information regarding our fair value
measurements.
Loan Receivable from Shurgard Europe
As of December 31, 2009, we had a €391.9 million loan receivable from Shurgard Europe
totaling $561,703,000 ($552,361,000 at December 31, 2008). The loan, as amended, bears interest at a
fixed rate of 9.0% per annum and matures March 31, 2013. Prior to being amended on October 31,
2009, the loan bore interest at a fixed rate of 7.5% per annum and matured on March 31, 2010. All
other material terms and conditions remained the same.
As of December 31, 2009, we have a commitment to provide additional loans, up to
€185 million ($265.2 million at December 31, 2009), to Shurgard Europe to assist in financing an
acquisition of its joint venture partners’ interest in affiliated two joint ventures. Shurgard Europe has
no obligation to acquire these interests, and the acquisition of these interests is contingent on a number
of items, including whether we assent to the acquisition. Our commitment expires on March 31, 2010
and any borrowings under this commitment will have the same terms and conditions as the existing
outstanding loan, as amended.
The loan is denominated in Euros and is converted to U.S. Dollars for financial statement
purposes. During each applicable period, because we have expected repayment of the loan within two
years of each respective balance sheet date, we have recognized foreign exchange rate gains or losses
in income as a result of changes in exchange rates between the Euro and the U.S. Dollar.
For the years ended December 31, 2009 and 2008, we recorded interest income of
approximately $24,013,000 and $17,859,000, respectively, related to the loan. These amounts reflect