THE NHP FOUNDATION AND ITS AFFILIATED ENTITIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2017 and 2016 __________
suspended. NHPF/WFH would record future equity method earnings only after its share of cumulative earnings during the suspended period exceeds the income recognized for the excess cash distributions. NHPF/WFHs investment in WorkForce Housing is periodically reviewed for impairment. NHPF/WFH records an impairment charge when events or circumstances change indicating that a decline in fair value below carrying value has occurred and such decline is other than temporary. In accordance with the accounting guidance for the consolidation of variable interest entities, NNHP/WFH determines when it should include the assets, liabilities, and activities of variable interest entities (“VIE“) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (2) the obligation to absorb losses or received benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE. Based on this guidance, Workforce Housing, in which NHPF/WFH invests, meets the definition of a VIE. However, management does not consolidate NHPF/WFH’s interests in this VIE, as it is not considered to be the primary beneficiary since multiple unrelated parties share the power to direct the activities that are considered most significant to the economic performance of these entities. NHPF/WFH currently records the amount of its investment in Workforce Housing as an asset on its statement of financial position, recognizes its share of Workforce Housing’s income or losses in the statement of activities, and discloses how it accounts for this investment in its financial statements. NHPF/WFH’s balance in investment in Workforce Housing represents its maximum exposure to loss. Workforce Housing’s exposure to loss on Workforce Housing is assessed by the condition and financial performance of the underlying projects as well as the strength of the general partners and their guarantees.
During 2016, the joint venture was modified, with Urban Atlantic withdrawing. NHPF/WFH is now the sole member of Workforce Housing I LLC.
Deferred Rent and Rent Holidays NHPF recognizes escalating rent provisions on a straight-line basis over the lease term. Certain of NHPF’s operating leases contain rent holidays. For these leases, NHPF recognizes the related rent expense on a straight-line basis at the earlier of the first rent payment or the date of possession of the leased property. The difference between the amounts charged to expense and the rent paid is recorded as deferred lease incentives and amortized over the lease term.
Derivatives
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