Page 43 - Apple REIT 9 2008 Annual Report

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Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements
(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair
value measurements. The Statement applies under other accounting pronouncements that require or permit fair value measurements.
Accordingly, this Statement does not require any new fair value measurements. In February 2008, the FASB released FASB Staff
Position (FSP) FAS 157-2 – Effective Date of FASB Statement No. 157, which defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008 for all nonfinancial assets and liabilities, except those items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually). The effective date of the statement related to those items
not covered by the deferral (all financial assets and liabilities or nonfinancial assets and liabilities recorded at fair value on a recurring
basis) is for fiscal years beginning after November 15, 2007. The adoption of this statement did not have and is not anticipated to have
a material impact on the Company’s results of operations or financial position.
In February 2007, FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS
159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective
of the guidance is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159
is effective as of the beginning of the first fiscal year that begins after November 15, 2007. SFAS 159 was effective for the Company
beginning January 1, 2008. The Company has elected not to use the fair value measurement provisions of SFAS 159 and therefore,
adoption of this standard did not have an impact on the financial statements.
In December 2007, FASB issued Statement No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R revises Statement
141, Business Combinations, by requiring an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This method
replaces the cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. A significant change included in SFAS 141R is the requirement that costs
incurred to effect an acquisition must be accounted for separately as expenses. These costs were previously capitalized as part of the
cost of the acquisition. Another significant change is the requirement that pre-acquisition contingencies be recognized at fair value
as of the date of acquisition if it is more likely than not that they will meet the definition of an asset or liability. SFAS 141R will
be adopted by the Company in the first quarter of 2009. The adoption of this standard will have a material impact on the results of
operations for the Company when it acquires real estate properties. In addition to other acquisition related costs, the Company will be
required to expense the commission paid to ASRG. As of December 31, 2008, the Company had $380,000 in transaction costs related
to outstanding contracts for the purchase of 19 hotel properties and other potential property acquisitions. These costs were recorded
as deferred acquisition costs and included in other assets in the Company’s consolidated balance sheet as of December 31, 2008.
In accordance with SFAS 141R, these costs will be expensed on January 1, 2009. If this statement had been effective for 2008, the
Company would have recorded approximately $8.6 million in transaction costs in its consolidated statement of operations for the year
ended December 31, 2008.
In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements-an
amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 requires that ownership interests in subsidiaries held
by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within
equity, but separate from the parent’s equity. The Statement also requires that the amount of consolidated net income attributable to the
parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. SFAS
160 will be adopted by the Company in the first quarter of 2009. The adoption of the statement is not anticipated to have a material
impact on the Company’s results of operations or financial position.
In March 2008, FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an
Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 is intended to improve transparency in financial reporting by
requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”). It also applies to non-derivative hedging instruments
and all hedged items designated and qualifying as hedges under SFAS 133. SFAS 161 is effective prospectively for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The
Company does not currently have any instruments that qualify within the scope of SFAS 133, and therefore the adoption of this
statement is not anticipated to have a material impact on the Company’s financial statements.