Public Storage 2009 Annual Report Download - page 47

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our financial condition or results of operations. Unless entitled to relief under specific statutory provisions, we also
would not be eligible to elect REIT status for any taxable year prior to the fifth taxable year which begins after the
first taxable year for which a REIT status was terminated. There can be no assurance that we would be entitled to
any statutory relief. In addition, if Shurgard failed to qualify as a REIT, we would succeed to significant tax
liabilities.
Impairment of Long-Lived Assets: Substantially all of our assets consist of real estate which are long-
lived assets. The evaluation of our long-lived assets for impairment includes determining whether indicators of
impairment exist, which is a subjective process. When any indicators of impairment are found, the evaluation of
such long-lived assets then entails projections of future operating cash flows, which also involves significant
judgment. Future events, or facts and circumstances that currently exist, that we have not yet identified, could cause
us to conclude in the future that our long-lived assets are impaired. Any resulting impairment loss could have a
material adverse impact on our financial condition and results of operations.
Estimated Useful Lives of Long-Lived Assets: Substantially all of our assets consist of depreciable or
amortizable long-lived assets. We record depreciation and amortization expense with respect to these assets based
upon their estimated useful lives. Any change in the estimated useful lives of those assets, caused by functional or
economic obsolescence or other factors, could have a material adverse impact on our financial condition or results of
operations.
Accruals for Contingencies: We are exposed to business and legal liability risks with respect to events that
have occurred, but in accordance with GAAP, we have not accrued for certain potential liabilities because the loss is
either not probable or not estimable or because we are not aware of the event. Future events and the results of
pending litigation could result in such potential losses becoming probable and estimable, which could have a
material adverse impact on our financial condition or results of operations. Significant unaccrued losses that we
have determined are at least reasonably possible are described in Note 13 to our December 31, 2009 consolidated
financial statements.
Accruals for Operating Expenses: Certain of our expenses are estimated based upon assumptions
regarding past and future trends, such as losses for workers compensation and employee health plans, and estimated
claims for our tenant reinsurance program. Our property tax expense, which as a real estate operator represents one
of our largest expenses totaling approximately $150 million in the year ended December 31, 2009, has significant
estimated components. Most notably, in certain jurisdictions we do not receive tax bills for the current fiscal year
until after our earnings are finalized, and as a result, we must estimate tax expense based upon anticipated
implementation of regulations and trends. If these estimates and assumptions were incorrect, our expenses could be
misstated.
Valuation of assets and liabilities acquired in business combinations: We have estimated the fair value of
real estate, intangible assets, debt, and the other assets and other liabilities acquired in business combinations, most
notably the Shurgard Merger. We have acquired these assets, in certain cases, with non-cash assets, most notably
the 38.9 million shares that we issued to the Shurgard shareholders. These estimates are based upon many
assumptions, including interest rates, market values of land and buildings in the U.S. and Europe, estimated future
cash flows from the tenant base in place at the time of the merger, and the recoverability of certain assets. We
believe that the assumptions used were reasonable, however, these assumptions were subject to a significant degree
of judgment, and others could use different assumptions and therefore come to materially different conclusions as to
the estimated values. If estimated values had been different, our depreciation and amortization expense, interest
expense, gain on disposition of an interest in Shurgard Europe, investments in real estate entities, real estate, debt,
and intangible assets could be materially different.
Overview of Management’s Discussion and Analysis of Operations
Our principal business activities include the acquisition, development, ownership and operation of self-
storage facilities which offer storage spaces for lease, generally on a month-to-month basis, for personal and
business use. We are the largest owner and operator of self-storage facilities in the U.S., and we have a 49% interest
in Shurgard Europe, which we believe is the largest owner and operator of self-storage facilities in Europe.