make payments to a third party contingent on future events. The disclosures are required even when the likelihood of the guarantor having to make any payments under the guarantee is remote. The CICA Handbook Section 3063 requires the use of a two-step process for determining when an impairment exists and measuring the amount of the impairment. An asset is deemed to be impaired if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from the direct use over its holding period and eventual disposition of the property. When impairment exists, the impaired asset is written down to its estimated fair value. There was no impairment identified in 2003. CICA Handbook Section 1100 clarifies the hierarchy of GAAP in Canada. It codifies the sources of GAAP for Canadian companies and more clearly establishes the authority of sources of GAAP outside of the CICA Handbook, such as U.S. GAAP. One of the major changes is the removal of industry precedence as an appropriate source of GAAP. The impact of this section on First Capital Realty includes the following: The sinking fund method of amortization of income properties, currently used by many Canadian public real estate entities, including First Capital Realty, will be discontinued. Effective January 1, 2004, the Company will amortize income properties on a straight-line basis over their remaining estimated useful lives. Management estimates the impact of this change will be to increase the amortization in 2004 by a range of $13 million to $16 million dependent on the assessment of the remaining estimated useful life. Certain leases provide for increases in rental payments over the lease term. Currently, revenue is recognized as it becomes due. Under the new standard, the total amount of rental revenue to be received from such leases is to be accounted for on a straight-line basis over the term of the lease. Accordingly, a receivable is recorded from the tenants for the current difference between the straight-line rent and the rent that is contractually due from the tenant. The Company has adopted this recommendation, on a prospective basis, effective January 1, 2004. Management has not completed its review and calculation of the impact of this change. Effective January 1, 2004, CICA Accounting Guideline 13 establishes specific conditions for when hedge accounting may be applied. First Capital Realty has foreign exchange contracts which hedge the dividend income from Equity One. The Company has adopted this recommendation effective January 1, 2004. Other future changes in accounting policies including the following: Hedging relationships Recognition of rental revenue Amortization of income properties Future changes in accounting policies Impairment of long-lived assets 35 First Capital Realty Annual Report 2003