Cousins Properties Incorporated 2006 Annual Report - SNL Financial

COUSINS PROPERTIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of payroll-related benefits to each project under construction based on time spent on each such project. Interest is
capitalized to qualifying assets under development in accordance with SFAS No. 34, “Capitalization of Interest
Costs,” and SFAS No. 58, “Capitalization of Interest Cost in Financial Statements That Include Investments
Accounted for by the Equity Method.” The Company capitalizes interest on average accumulated expenditures
outstanding during a period on qualifying projects based first on interest incurred on specific project debt, if any,
and next using the weighted average interest rate for non-project specific debt. The amount of interest capitalized
does not exceed the actual interest incurred by the Company during any period presented. Interest is also capitalized
to investments accounted for under the equity method when the investee has property under development with a
carrying value in excess of the investee’s borrowings. To the extent that there is debt at the venture during the
construction period, the venture capitalizes interest using the specifics of that debt.
Interest, real estate taxes and operating expenses of properties are also capitalized based on the percentage of
the project available for occupancy from the date a project receives its certificate of occupancy, to the earlier of the
date on which the project achieves 95% economic occupancy or one year thereafter.
Leasing costs capitalized include commissions paid to outside brokers and outside legal costs to negotiate and
document a lease agreement. These costs are capitalized as a cost of the tenant’s lease and amortized over the related
lease term. Internal leasing costs are capitalized utilizing guidance in SFAS No. 91, “Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.” Leasing
personnel are queried monthly, and the Company capitalizes their compensation and payroll-related fringe benefits
directly related to time spent performing initial direct leasing activities.
Impairment: Long-lived assets include property, goodwill and other assets which are held and used by an
entity. The Company evaluates the carrying value of its long-lived assets in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” and SFAS No. 142, “Goodwill and Other
Intangible Assets.” Management reviews the carrying value of long-lived assets for the existence of any
other-than-temporary indicators of impairment. For long-lived assets other than goodwill, the Company recognizes
impairment losses, if any, on held for use assets when the fair value, calculated as the expected undiscounted future
operating cash flows derived from such assets, are less than their carrying value. In such cases, the carrying value of
the long-lived asset is reduced to its fair value. Additionally, the Company recognizes impairment losses if the fair
value of a property held for sale, as defined in SFAS No. 144, net of selling costs, is less than its carrying value. The
Company ceases depreciation of a property when it is categorized as held for sale. The Company has recorded no
such impairment losses within its consolidated entities during 2006, 2005 or 2004. The accounting for long-lived
assets is the same at the Company’s unconsolidated joint ventures, one of which recorded an impairment loss in
2004 on a held for sale property (see Note 6 — CP Venture LLC and CP Venture Two LLC). No impairment losses
were recorded by the Company’s unconsolidated joint ventures in 2005 or 2006.
The Company evaluates the carrying value of its investments in unconsolidated joint ventures in accordance
with Accounting Principles Board (“APB”) Opinion No. 18, “The Equity Method of Accounting for Investments in
Common Stock.” The Company utilizes a discounted cash flow analysis and evaluates the results of that calculation
to determine if an other-than-temporary impairment exists. The Company concluded that it did not have an
impairment in any of its investments in joint ventures in 2006, 2005 or 2004.
The Company evaluates the carrying value of its goodwill in accordance with SFAS No. 142. The Company
records no amortization of goodwill, but it is tested annually, at the same time each year (or at any point during the
year if indicators of impairment exists), for impairment using a discounted cash flow analysis. For all periods
presented, the tests for impairment of goodwill did not result in any impairment. The goodwill relates entirely to the
office reporting unit. As office assets are sold, either by the Company or at its joint ventures, goodwill is allocated to
the cost of each sale.
Acquisition of Operating Properties: The Company allocates the purchase price of operating properties
acquired to land, building, tenant improvements and identifiable intangible assets and liabilities based upon relative
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