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

Accounting for Uncertain Tax Positions — In accordance with ASC Subtopic 740-10-15, Income Taxes(“ASC 740-10-15”), ASC 740-10-15 addresses the determination of whether tax benefits claimed orexpected to be claimed on a tax return should be recorded in the financial statements. UnderASC 740-10-15, the Company may recognize the tax benefit from an uncertain tax position only if it is morelikely than not that the tax position will be sustained on examination by the taxing authorities, based on thetechnical merits of the position. The tax benefits recognized in the financial statements from such a positionshould be measured based on the maximum benefits that have a greater than 50% likelihood of beingrealized upon ultimate settlement. ASC 740-10-15 also provides guidance on derecognition, classification,interest and penalties on income taxes, accounting in the interim periods and requires increased disclosures.The Company adopted the provisions of ASC 740-10-15 on January 1, 2007. There was no cumulativeeffect adjustment to retained earnings related to adoption.Cash — Cash consists of currency on hand.Escrows and Restricted Cash — Escrows consist primarily of amounts held by lenders to provide forfuture property tax expenditures and tenant improvements. Restricted cash represents amounts committedfor various utility deposits, security deposits and insurance reserves. Certain of these amounts may bereduced upon the fulfillment of specific obligations.Deferred Charges — Deferred charges include deferred finance and leasing costs. Costs incurred to obtainfinancing are capitalized and amortized into interest expense using the effective interest method over theterm of the related debt.All direct and indirect leasing costs are capitalized and amortized on a straight-line basis over the term ofthe related lease. Unamortized costs are charged to amortization expense upon the early termination of therelated lease.Derivative Instruments — The Company uses interest rate swap contracts, forward-starting swap contractsand interest rate cap contracts to manage risk from fluctuations in interest rates as well as to hedgeanticipated future financing transactions. Interest rate swaps involve the receipt of variable-rate amounts inexchange for fixed-rate payments over the life of the agreements without exchange of the underlyingprincipal amount. Forward-starting swap contracts lock in a maximum interest rate on anticipated futurefinancing transactions. Interest rate caps involve the receipt of variable-rate amounts beyond a specifiedstrike price over the life of the agreements without exchange of the underlying principal amount. TheCompany believes these agreements are with counter-parties who are creditworthy financial institutions.The Company adheres to the provisions of ASC Subtopic 815-10-15, Derivatives and Hedging(“ASC 815-10-15”). ASC 815-10-15 establishes accounting and reporting standards for derivativeinstruments, including certain derivative instruments embedded in other contracts, and for hedgingactivities. It requires the recognition of all derivative instruments as assets or liabilities in the Company’sconsolidated balance sheets at fair value. Changes in the fair values of derivative instruments that are notdesignated as hedges, or that do not meet the hedge accounting criteria in ASC 815-10-15, are required to bereported through the statements of operations.For derivatives designated as qualifying cash flow hedges, the effective portion of changes in fair value ofthe derivatives is initially recognized in other comprehensive income and, subsequently, reclassified toearnings when the forecasted transactions occur, and the ineffective portions are recognized directly in thestatements of operations. The Company assesses the effectiveness of each hedging relationship bycomparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows ofthe designated hedged item or transaction. For derivatives not designated as hedges, changes in fair valueare recognized in earnings. The Company does not use derivatives for trading or speculative purposes.F-82