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

(b) Adoption of Accounting StandardsThe company adopted amendments to IAS 12, “Income Taxes” (“IAS 12”), effective January 1, 2012. Theseamendments are applicable to the measurement of deferred tax liabilities and deferred tax assets whereinvestment property is measured using the fair value model in IAS 40, “Investment Property” (“IAS 40”). Theamendments introduce a rebuttable presumption that, for purposes of determining deferred tax consequencesassociated with temporary differences relating to investment properties, the carrying amount of an investmentproperty is recovered entirely through sale. This presumption is rebutted if the investment property is held withina business model whose objective is to consume substantially all of the economic benefits embodied in theinvestment property over time, rather than through sale. The company has determined that based on its businessmodel, the rebuttable presumption introduced by the amendments to IAS 12 has been overcome and hascontinued to measure deferred taxes on the basis that the carrying amount of investment properties will berecovered through use except where there is a specific plan to sell a property in the foreseeable future. Therefore,the amendments to IAS 12 did not have an impact on the measurement of the company’s deferred tax liabilities.(c) EstimatesThe preparation of financial statements in accordance with IAS 34 requires the use of certain critical accountingestimates. It also requires management to exercise judgment in applying the parent company’s accountingpolicies. The critical accounting estimates and judgments have been set out in Note 2 to the Business’ carve-outfinancial statements for the year ended December 31, 2011.NOTE 3: INVESTMENT PROPERTIES(US$ Millions)OperatingpropertiesMar. 31, 2012 Dec. 31, 2011DevelopmentOperating Developmentproperties Total properties propertiesTotalBalance at beginning of period $ 25,730 $ 1,864 $ 27,594 $ 19,395 $ 1,565 $ 20,960Property acquisitions 53 - 53 6,411 158 6,569Property dispositions (1) (302) - (302) (1,661) - (1,661)Capital expenditures (2) 57 68 125 343 341 684Reclassification of development to operating - - - 166 (166) -Fair value gains (losses) (3) 395 (6) 389 1,374 (15) 1,359Foreign currency translation and other changes 262 17 279 (298) (19) (317)Balance at end of period $ 26,195 $ 1,943 $ 28,138 $ 25,730 $ 1,864 $ 27,594(1) Property dispositions represent fair value at time of sale, or the selling price.(2) Capital expenditures include capitalized borrowing costs of $20 million (2011 - $90 million) and initial direct leasing costs of $4 million(2011 - $37 million).(3) Fair value gains (losses) include realized gains of $78 million (2011 - $365 million).The Business determines the fair value of each operating property based upon, among other things, rental incomefrom current leases and assumptions about rental income from future leases reflecting market conditions at theapplicable balance sheet dates, less future cash outflows in respect of such leases. Fair values are primarilydetermined by discounting the expected future cashflows, generally over a term of 10 years including a terminalvalue based on the application of a capitalization rate to estimated year 11 cashflows. Certain operatingproperties are valued using a direct capitalization approach whereby a capitalization rate is applied to estimatedcurrent year cashflows. Developments properties under active development are also measured using a discountedcashflow model, net of costs to complete, as of the balance sheet date. Development sites in the planning phasesare measured using comparable market values for similar assets. In accordance with its policy, the Businessmeasures its operating properties and development properties using valuations prepared by management. Fromtime to time, the Business obtains valuations of selected operating and development properties prepared byqualified external valuation professionals in connection with financing transactions or pursuant to othercontractual arrangements. These valuations, which are prepared for purposes other than financial reporting andare not necessarily prepared as of the balance sheet date, are taken into consideration by management but do notform the basis for the company’s reported values.F-50