FORM 20-F/A Brookfield Property Partners L.P. - Brookfield Asset ...

n) Critical judgments in applying accounting policiesThe following are the critical judgments that have been made in applying the company’s accounting policies andthat have the most significant effect on the amounts in the financial statements:(i)(ii)Investment in U.S. Office FundThe company’s investment in the U.S. Office Fund (the “Fund”) is described in Note 6. The criticaljudgments made in accounting for the Fund relate to the company’s determination that it obtainedcontrol of the Fund upon exercise of the U.S. Office Fund Option, which is described in Note 6, in thethird quarter of 2011, the measurement of the transactions related to the exercise of the U.S. OfficeFund Option and redemption of non-controlling interests in the Fund, as well as the classification ofgains or losses resulting from the exercise of the option and redemption of non-controlling interests inearnings or equity. Prior to exercise of the U.S. Office Fund Option, critical judgments in respect of theaccounting for the Fund related to the determination that the Fund was subject to joint control based onthe rights assigned to the company and its joint venture partners under the joint venture agreement andthe classification of certain of the investments in the venture as liabilities or equity, the identification ofcontractual provisions in the joint venture agreement that are accounted for separately as financialinstruments under IAS 39, “Financial Instruments – Recognition and Measurement” (“IAS 39”).Investment propertyThe company’s accounting policies relating to investment property are described in Note 2(b). Inapplying this policy, judgment is applied in determining whether certain costs are additions to thecarrying amount of the property and, for properties under development, identifying the point at whichpractical completion of the property occurs and identifying the directly attributable borrowing costs tobe included in the carrying value of the development property. Judgment is also applied in determiningthe extent and frequency of independent appraisals.(iii) Income taxesThe Business applies judgment in determining the tax rate applicable to its Real Estate InvestmentTrust (“REIT”) subsidiaries and identifying the temporary differences related to such subsidiaries withrespect to which deferred income taxes are recognized. Deferred taxes related to temporary differencesarising in the company’s REIT subsidiaries, joint ventures and associates are measured based on the taxrates applicable to distributions received by the investor entity on the basis that REITs can deductdividends or distributions paid such that their liability for income taxes is substantially reduced oreliminated for the year, and the Business intends that these entities will continue to distribute theirtaxable income and continue to qualify as REITs for the foreseeable future.The Business measures deferred income taxes associated with its investment properties based on itsspecific intention with respect to each asset at the end of the reporting period. Where the Business has aspecific intention to sell a property in the foreseeable future, deferred taxes on the building portion ofthe investment property are measured based on the tax consequences following from the disposition ofthe property. Otherwise, deferred taxes are measured on the basis the carrying value of the investmentproperty will be recovered substantially through use. Judgment is required in determining the mannerin which the carrying amount of each investment property will be recovered.The Business also makes judgments with respect to the taxation of gains inherent in its investments inforeign subsidiaries and joint ventures. While the Business believes that the recovery of its originalinvestment in these foreign subsidiaries and joint ventures will not result in additional taxes, certainunremitted gains inherent in those entities could be subject to foreign taxes depending on the manner ofrealization.(iv) LeasesThe company’s policy for revenue recognition on operating properties is described in Note 2(h)(i). Inapplying this policy, the Business makes judgments with respect to whether tenant improvementsF-15