DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business: Cousins Properties Incorporated (“Cousins”), a Georgia corporation, is a self-administered and self-managed real estate investment trust (“REIT”). Cousins conducts substantially all of its business through Cousins Properties, LP ("CPLP"). Cousins owns approximately 98% of CPLP and consolidates CPLP. CPLP owns Cousins TRS Services LLC ("CTRS") a taxable entity which owns and manages its own real estate portfolio and performs certain real estate related services for other parties.

Cousins, CPLP, CTRS, and their subsidiaries (collectively, the “Company”) develop, acquire, lease, manage, and own primarily Class A office properties and opportunistic mixed-use developments in the Sunbelt markets of the United States with a focus on Georgia, Texas, Arizona, Florida, and North Carolina. As of December 31, 2018, the Company’s portfolio of real estate assets consisted of interests in 15.0 million square feet of office space and 310,000 square feet of mixed-use space.

Basis of Presentation: The consolidated financial statements include the accounts of the Company and its consolidated partnerships and wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The Company presents its financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) as outlined in the Financial Accounting Standard Board’s Accounting Standards Codification (the “Codification” or “ASC”). The Codification is the single source of authoritative accounting principles applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.

For the three years ended December 31, 2018, there were no items of other comprehensive income. Therefore, the Company did not present comprehensive income.

The Company evaluates all partnerships, joint ventures, and other arrangements with variable interests to determine if the entity or arrangement qualifies as a variable interest entity (“VIE”), as defined in the Codification. If the entity or arrangement qualifies as a VIE and the Company is determined to be the primary beneficiary, the Company is required to consolidate the assets, liabilities, and results of operations of the VIE. As of December 31, 2018 the Company did not have any partnerships, joint ventures, or other arrangements with variable interests that qualified as a VIE.

Recently Issued Accounting Standards: On January 1, 2018, the Company adopted ASU 2014-09 ("ASC 606"), "Revenue from Contracts with Customers" using the “modified retrospective” method; as such, the Company applied the guidance only to the most recent period presented in the financial statements. Under the new guidance, companies are required to recognize revenue when the seller satisfies a performance obligation, which would be when the buyer takes control of the good or service. Prior to adoption of ASC 606, gains or losses from real estate sales were adjusted at the time of the sale by the maximum exposure to loss related to continuing involvement with the real estate asset. After adoption, any continuing involvement is considered a separate performance obligation and the sales price is required to be allocated between the elements with continuing involvement and those without continuing involvement. As the continuing performance obligations are satisfied, additional gains or losses are recognized. The Company had no sales of real estate with continuing involvement during 2018 or in any prior periods that affected results of operations in 2018 or could affect results of operations in future periods.

The Company categorizes its primary sources of revenue into revenue from contracts with customers and other revenue accounted for as leases under Accounting Standards Codification Topic 840 - Leases ("ASC 840") as follows:

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Rental property revenue consists of (1) contractual revenues from leases recognized on a straight-line basis over the term of the respective lease; (2) percentage rents recognized once a specified sales target is achieved; (3) parking revenue; and (4) the reimbursement of the tenants' share of real estate taxes, insurance, and other operating expenses. Rental property revenue is accounted for in accordance with the guidance set forth in ASC 840.


•	Fee revenue consists of development fees, management fees, and leasing fees earned from unconsolidated joint ventures and from third parties. Fee revenue is accounted for in accordance with the guidance set forth in ASC 606.


•	Other revenue consists primarily of termination fees, which are accounted for in accordance with the guidance set forth in ASC 840.

Fee revenue and other revenue, as a whole, are immaterial to total revenues. The Company made no changes to previously reported amounts related to the adoption of ASC 606. For the years ended December 31, 2018, 2017, and 2016 the Company recognized rental property revenue of $461.9 million, $446.0 million, and $249.8 million, respectively. For the years ended December 31, 2018, 2017, and 2016 the Company recognized fee and other revenue of $13.4 million, $20.2 million, and $9.4 million, respectively.

In February 2016, the FASB issued ASU 2016-02, "Leases," ("ASC 842") which amends the existing standards for lease accounting by requiring lessees to record most leases on their balance sheets and making targeted changes to lessor accounting and reporting. The new standard will require lessees to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months and classify such leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method (finance leases) or on a straight-line basis over the term of the lease (operating leases). Leases with a term of 12 months or less will be accounted for similarly to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance. In July 2018, the FASB amended the new leasing standard, providing lessors with a practical expedient to not separately classify and disclose non-lease components of revenue from the related lease components under certain conditions. The new standard also revises the treatment of indirect leasing costs and permits the capitalization and amortization of direct leasing costs only. In 2018, the Company capitalized $3.8 million of indirect leasing costs.

Because the Company expects substantially all of its leases with tenants to qualify for the practical expedient, the Company's accounting and reporting for leases as lessor is not expected to change materially. For those leases where the Company is lessee, specifically ground leases, the adoption of ASC 842 will require the Company to record a right of use asset and a lease liability on the consolidated balance sheet. Ground leases executed before the adoption of ASC 842 will continue to be accounted for as operating leases and will not result in a materially different ground lease expense. However, ground leases executed after the adoption of ASC 842 are expected to be accounted for as finance leases which will result in ground lease expense being recorded using the effective interest method instead of the straight-line method over the term of the lease, which would result in higher ground lease expense in the earlier years of a ground lease when compared to the straight line method. The Company expects to use the "modified retrospective" method upon adoption of ASC 842 on January 1, 2019, which permits application of the new standard on the adoption date as opposed to the earliest comparative period presented in its financial statements. The Company expects to record a right of use asset and a lease liability in the amount of approximately $40 million upon the adoption of ASC 842.

In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 updates the definition of an “in substance nonfinancial asset” and clarifies the derecognition guidance for nonfinancial assets to conform with the new revenue recognition standard. Among other things, ASU 2017-05 requires companies to recognize 100% of the gain on the transfer of a nonfinancial asset to an entity in which it has a noncontrolling interest. ASU 2017-05 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. The Company adopted this guidance using the "modified retrospective" method effective on January 1, 2018. As a result of the adoption of ASU 2017-05, the Company recorded a cumulative effect from change in accounting principle which credited distributions in excess of cumulative net income by $22.3 million. This cumulative effect adjustment resulted from the 2013 transfer of a wholly-owned property to an entity in which it had a noncontrolling interest.

In May 2017, FASB issued ASU 2017-09, "Scope of Modification Accounting," which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, "Compensation—Stock Compensation." This update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard on January 1, 2018. Adoption of the standard did not have a material impact on the Company's financial statements.