Fair value reporting for investment properties under US GAAP
Fair value reporting for investment properties under US GAAP
Fair value reporting for investment properties under US GAAP
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Timetable <strong>for</strong> the proposed standard<br />
The exposure draft could be issued as early as September 2010, with an abbreviated comment letter period ending<br />
contemporaneously with that of the exposure draft on the Lease Project issued in August. If completed, it is expected<br />
that the new <strong>investment</strong> property standard will be adopted concurrently with the proposed new leasing standard, and<br />
that an exclusion from the lease standard will be made <strong>for</strong> lessors of <strong>investment</strong> <strong>properties</strong> accounted <strong>for</strong> at fair <strong>value</strong><br />
in the United States, similar to the one already discussed by the IASB <strong>for</strong> those <strong>reporting</strong> at fair <strong>value</strong> <strong>under</strong> IAS 40. It<br />
is also expected that the adoption dates of the two standards will be aligned even if the finalized release of each<br />
standard is different.<br />
For many public REITs/REOCs, substantial new processes and controls will be needed in moving to an <strong>investment</strong><br />
property standard. In most cases a system-based solution will be the answer. Today, many real estate accounting<br />
systems can transfer key data, such as rent rolls, into valuation software and frequently do so to prepare valuations <strong>for</strong><br />
lenders. This may need to be further refined, and require additional processes to be developed to review and approve<br />
assumptions and output. Given that the potential adoption date of such a standard may be as early as 2013, it is not<br />
too early <strong>for</strong> real estate companies to start considering their systems, processes, and human capital needs as they<br />
consider long-term strategies.<br />
Lease project/<strong>investment</strong> property project timeline and path <strong>for</strong>ward<br />
Phase I<br />
Exposure Draft<br />
(mid-2010)<br />
• Training/awareness<br />
• Preliminary assessment<br />
• Strategic planning <strong>for</strong><br />
the future<br />
• Process and technology<br />
readiness<br />
<strong>US</strong> <strong>GAAP</strong><br />
today…<br />
Assess impact and<br />
determine strategy<br />
Phase II<br />
Final standard<br />
• Issues resolution<br />
• Business strategy<br />
changes<br />
• Systems<br />
changes/upgrades<br />
• Execution<br />
(2011)<br />
• Planning <strong>for</strong> the future<br />
<strong>Fair</strong> <strong>value</strong> <strong>reporting</strong> <strong>for</strong> <strong>investment</strong> <strong>properties</strong> 10 PricewaterhouseCoopers<br />
Phase III<br />
Project management, communication, knowledge transfer<br />
Effective date<br />
2013/2014<br />
• Go live and business as<br />
usual<br />
• Reporting updates<br />
• Ongoing monitoring<br />
<strong>US</strong> <strong>GAAP</strong><br />
tomorrow<br />
Establish policies and<br />
prepare financial results Embed the new standard
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