This excerpt taken from the REXI 10-K filed May 19, 2008.
Investments in Unconsolidated Entities (Restated)
The Company accounts for its investments in financial fund management, real estate and commercial finance investment vehicles under the equity method of accounting since the Company has the ability to exercise significant influence over operating and financial decisions of these entities.
Financial Fund Management
As a owner of limited and general partner interests in the Trapeza entities, the Company has the ability to exercise significant influence over their operating and financial decisions. The Companys combined general and limited partner interests in these entities range from 13% to 50%.
The Company has interests in five other company-sponsored partnerships. Four of these partnerships invest in regional banks and the other is organized as a hedge fund that the Company manages. The Companys combined general and limited partner interests in these partnerships range from approximately 5% to 10%. Prior to October 1, 2005, two of these entities were consolidated in accordance with EITF 04-05. In fiscal 2006, the partnership agreements were amended to give the limited partners substantive kick-out rights. Therefore, the partnerships were no longer consolidated.
Historically, the Company has presented its equity earnings and losses of the Trapeza entities on a one-quarter delay as permitted under Generally Accepted Accounting Principles in the United States (GAAP). Improvements in the timeliness and availability of financial data from the Trapeza entities have allowed the Company to report its share in those earnings on a current basis as of October 1, 2005. As a result of this change, the Companys equity in earnings of the Trapeza entities of $1.1 million, net of tax of $810,000 for the three months ended September 30, 2005 has been reported as a cumulative change in accounting principle as of October 1, 2005.