Public Storage 2009 Annual Report Download - page 97

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PUBLIC STORAGE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
F-10
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from those estimates.
Income Taxes
For all taxable years subsequent to 1980, the Company has qualified and intends to continue
to qualify as a real estate investment trust (“REIT”), as defined in Section 856 of the Internal Revenue
Code. As a REIT, we do not incur federal or significant state tax on that portion of our taxable income
which is distributed to our shareholders, provided that we meet certain tests. We believe we have met
these tests during 2009, 2008 and 2007 and, accordingly, no provision for federal income taxes has
been made in the accompanying consolidated financial statements on income produced and distributed
on real estate rental operations. We have business operations in taxable REIT subsidiaries that are
subject to regular corporate tax on their taxable income, and such corporate taxes attributable to these
operations are presented in ancillary cost of operations in our accompanying consolidated statements
of income. We also are subject to certain state taxes, which are presented in general and administrative
expense in our accompanying consolidated statements of income. We have concluded that there are no
significant uncertain tax positions requiring recognition in our financial statements with respect to all
tax periods which remain subject to examination by major tax jurisdictions as of December 31, 2009.
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. Costs associated with the sale of real estate facilities or interests in real estate
investments are expensed as incurred. The purchase cost of existing self-storage facilities that we
acquire are allocated based upon relative fair value of the land, building and tenant intangible
components of the real estate facility. Expenditures for repairs and maintenance are expensed when
incurred. Depreciation expense is computed using the straight-line method over the estimated useful
lives of the buildings and improvements, which generally range from 5 to 25 years.
Other Assets
Other assets primarily consist of prepaid expenses, investments in held-to-maturity debt
securities, accounts receivable, interest receivable, and restricted cash.
Accrued and Other Liabilities
Accrued and other liabilities consist primarily of trade payables, property tax accruals, tenant
prepayments of rents, accrued interest payable, accrued payroll, losses and loss adjustment liabilities
for our own exposures, and estimated losses related to our tenant insurance activities. Contingent
losses are accrued when they are determined to be probable, and to the extent that they are estimable.
When it is at least reasonably possible that a significant unaccrued contingent loss has occurred, we
disclose the nature of that potential loss under “Legal Matters” in Note 13 “Commitments and
Contingencies”.