Summary of Changes to Significant Accounting Policies New accounting policies adopted by the Company in 2003 are as follows: Funds from operations Accounting for operating leases acquired in either an asset acquisition or a business combination Stock-based compensation and other stock-based payments Other changes that do not impact the Company in 2003 are as follows: Guarantees 34 First Capital Realty Annual Report 2003 estimates. In the event the allocation to the building is inappropriate or the estimated useful life of the buildings prove incorrect, the computation of amortization will not be appropriately reflected over future periods. Management’s Discussion and Analysis  continued Effective in 2003, First Capital Realty discontinued disclosure of funds from operations in its Consolidated Financial Statements, in accordance with revisions to CICA Handbook Sections 1540 (“Cash Flow Statements”) and 3500 (“Earnings per Share”). Effective for transactions after September 12, 2003, in accordance with CICA Handbook Sections 1581 (“Business Combinations”) and 3062 (“Goodwill and Other Intangible Assets”), the purchase price of income property is allocated to land, building, tenant improvements and intangibles (such as the value of above and below-market leases, origination costs associated with in-place leases and the value of tenant relationships, if any). The values of the above and below-market leases are amortized and recorded as either a decrease (in the case of above-market leases) or an increase (in the case of below-market leases) to property rental revenue over the remaining term of the associated lease. The values associated with in-place leases and tenant relationships are amortized over the expected term of the relationship, which includes an estimated probability of the lease renewal, and its estimated term. In the event a tenant vacates its leased space prior to the contractual termination of the lease and no rental payments are being made per the lease, any unamortized balance of the related intangible will be expensed. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease or expensed in full in the event the lease is terminated prior to its contractual expiration date. In 2003, five properties were acquired subsequent to the implementation of this new policy and accounted for in accordance with the new requirements. During 2003, Section 3870 of the CICA Handbook was amended to require public companies to expense all stock-based compensation over the vesting period, if any, based on the fair value of such awards as measured at the grant date, effective January 1, 2004. These provisions permit prospective application if the fair value based method is applied for fiscal years beginning before January 1, 2004. The Company adopted this policy in 2003 and recorded an expense for options issued during the year. The fair value of options issued prior to January 1, 2003, which is not recorded as an expense under the provisions of this new accounting policy, is disclosed along with pro forma net income per share in Note 12 to the Consolidated Financial Statements. Effective January 1, 2003, the Company implemented the requirements of CICA Accounting Guideline 14, which requires a guarantor to disclose information about guarantees it has provided. Under the Guideline, a guarantee is defined as a contract or indemnification agreement that requires an entity to