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This excerpt taken from the EQR 8-K filed Mar 6, 2007. THE GALLERY Notes to Statements of Revenue and Certain Expenses 1. Basis of Presentation On October 24, 2006, ERP Operating Limited Partnership (collectively with Equity Residential, its general partner, the “Company”) indirectly acquired an apartment building in Hermosa Beach, California known as The Gallery (the “Property”). The statements of revenue and certain expenses relate to the operations of The Gallery and were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, including Rule 3-14 of Regulation S-X. Accordingly, the accompanying statements of revenue and certain expenses have been prepared using the accrual method of accounting, and certain expenses such as depreciation, amortization, income taxes and entity expenses are not reflected in the statements of revenue and certain expenses, as required by Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Consequently, the statements of revenue and certain expenses for the periods presented are not representative of the actual operations for the periods presented, as certain revenues and expenses which may not be in the proposed future operations of The Gallery have been excluded in accordance with Rule 3-14 of Regulation S-X. The accompanying unaudited interim statement of revenue and certain expenses has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and was prepared on the same basis as the statement of revenue and certain expenses for the year ended December 31, 2005. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the information for this interim period have been made. The revenue in excess of certain expenses for such interim period is not necessarily indicative of the excess of revenue over certain expenses for the full year. 2. Summary of Significant Accounting Policies Revenue Recognition The residential apartments are leased under operating leases with terms of generally one year or less. Rental income is recognized on a straight-line basis over the life of the lease. Repairs and Maintenance Repairs and maintenance costs are expensed as incurred, while significant improvements, renovations and replacements are capitalized. Estimates The preparation of the statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising Costs All advertising costs are expensed as incurred and included as operating expenses on the accompanying statements of revenue and certain expenses. For the year ended December 31, 2005 and the nine months ended September 30, 2006 (unaudited), advertising expenses were approximately $800 and $0, respectively. 54 |
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