2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, although management believes that the disclosures presented herein are adequate to make the accompanying unaudited consolidated interim financial statements not misleading. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the notes thereto included in Winthrop’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC. In the opinion of management, all adjustments considered necessary for fair statements have been included, and all such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the operating results for the full year.

The accompanying unaudited consolidated interim financial statements represent the consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT-TRS Management Corp., the Operating Partnership and all majority-owned subsidiaries and affiliates over which the Trust has financial and operating control and variable interest entities (“VIE“s) in which the Trust has determined it is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. The Trust accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Trust’s share of the earnings of these joint ventures and companies is included in consolidated net income.

Stock-Based Compensation

Pursuant to the Trust’s 2007 Long Term Stock Incentive Plan the Trust may, from time to time, issue stock-based compensation awards to certain eligible persons including those performing services for FUR Advisors LLC (“FUR Advisors”), the Trust’s external advisor. During the first nine months of 2013, the Trust issued 600,000 restricted common shares of beneficial interest. See Note 16 for further discussion. The Trust accounts for this stock-based compensation in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Until the awards are no longer subject to forfeiture, the Trust measures stock-based compensation expense at each reporting date for any changes in fair value and recognizes the expense prorated for the portion of the requisite service period completed.

Reclassifications

Certain prior year balances of accounts receivable have been reclassified to accrued rental income in order to conform to the current year presentation. Discontinued operations for all periods presented in the Consolidated Statements of Operations include the operations of the Trust’s retail properties in Seabrook, Texas and Denton, Texas which were disposed of in August 2013 and July 2013, respectively, and the Trust’s office properties in Deer Valley, Arizona and Andover, Massachusetts which were disposed of in June 2013 and March 2013, respectively, and the Trust’s retail property in Memphis, Tennessee and its office property in Indianapolis, Indiana, both of which were disposed of in September 2012. Also included in discontinued operations for all periods presented are the operations of the Trust’s office property in Lisle, Illinois which is currently under contract to be sold and is classified as held for sale at September 30, 2013. It is expected that the sale will be consummated during the fourth quarter of 2013.

Out of Period Adjustment

During the three months ended September 30, 2013, the Trust recorded an out of period adjustment in the amount of $224,000 to correct the capitalization of interest on an equity method investment in the Trust’s balance sheet and interest expense in the statement of operations. As a result, the Trust’s net income and income from continuing operations was understated by $224,000 for the period ended June 30, 2013 and overstated by the same amount for the three months ended September 30, 2013. Additionally, for the period ended June 30, 2013, the Trust’s cash provided by operating activities was understated by $224,000 and cash provided by investing activities was overstated by $224,000. The Trust concluded that this adjustment is not material to the current period or the prior period’s consolidated financial statements. As such, this cumulative charge was recorded in the statement of operations for the three months ended September 30, 2013, rather than restating prior periods.

Earnings Per Share

The Trust determines basic earnings per share on the weighted average number of common shares of beneficial interest (“Common Shares”) outstanding during the period and reflects the impact of participating securities. The Trust computes diluted earnings per share based on the weighted average number of Common Shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

The Trust has calculated earnings per share in accordance with relevant accounting guidance for participating securities and the two class method. The reconciliation of earnings attributable to Common Shares outstanding for the basic and diluted earnings per share calculation is as follows (in thousands, except per share data):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Basic
Income from continuing operations	$	12,167		$	15,962		$	23,404		$	25,690
(Income) loss attributable to non-controlling interest		995			(939	)		2,419			435
Preferred dividend on Series D Preferred Shares		(2,787	)		(2,786	)		(8,360	)		(6,498	)
Dividend on Restricted Shares		(97	)		—			(211	)		—

Income from continuing operations applicable to Common Shares		10,278			12,237			17,252			19,627
Income (loss) from discontinued operations		(1,434	)		85			8,025			594
Allocation of undistributed earnings to Restricted Shares		(9	)		—			(24	)		—

Net income applicable to Common Shares	$	8,835		$	12,322		$	25,253		$	20,221

Basic weighted-average Common Shares		33,076			33,075			33,047			33,064


Income from continuing operations	$	0.31		$	0.37		$	0.52		$	0.59
Income (loss) from discontinued operations		(0.04	)		—			0.24			0.02

Earnings per Common Share - Basic	$	0.27		$	0.37		$	0.76		$	0.61

Diluted
Income from continuing operations	$	12,167		$	15,962		$	23,404		$	25,690
(Income) loss attributable to non-controlling interest		995			(939	)		2,419			435
Preferred dividend on Series D Preferred Shares		(2,787	)		(2,786	)		(8,360	)		(6,498	)
Dividend on Restricted Shares		(97	)		—			(211	)		—

Income from continuing operations applicable to Common Shares		10,278			12,237			17,252			19,627
Income (loss) from discontinued operations		(1,434	)		85			8,025			594
Allocation of undistributed earnings to Restricted Shares		(9	)		—			(24	)		—

Net income applicable to Common Shares	$	8,835		$	12,322		$	25,253		$	20,221


Basic weighted-average Common Shares		33,076			33,075			33,047			33,064
Stock options (1)		2			1			2			—
Restricted shares (2)		70			—			40			—

Diluted weighted-average Common Shares		33,148			33,076			33,089			33,064


Income from continuing operations	$	0.31		$	0.37		$	0.52		$	0.59
Income (loss) from discontinued operations		(0.04	)		—			0.24			0.02

Earnings per Common Share - Diluted	$	0.27		$	0.37		$	0.76		$	0.61

(1)	The Trust’s outstanding stock options were dilutive for the three and nine months ended September 30, 2013 and 2012. The weighted-average stock options for the nine months ended September 30, 2012 was less than one thousand shares.

(2)	The Trust’s restricted stock was dilutive for the three and nine months ended September 30, 2013.

For the quarter ended September 30, 2013, the Trust paid a regular quarterly dividend of $0.1625 per Common Share and a regular quarterly dividend of $0.578125 per share of its Series D Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series D Preferred Shares”).

Recently Issued Accounting Standards

On February 5, 2013, FASB issued ASU No. 2013-02: Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting the reclassifications of significant amounts out of accumulated other comprehensive income. This guidance requires entities to present the effects on the line items of net income of significant reclassifications from accumulated other comprehensive income, either where net income is presented or in the notes, as well as cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. The new disclosure requirements will be effective for annual reporting periods beginning on or after January 1, 2013. The new disclosures will be required for both interim and annual reporting. The Trust has evaluated this new guidance and its adoption did not have a material impact on its consolidated financial statements.

On December 16, 2011, FASB issued ASU No. 2011-11: Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities, clarified by ASU No. 2013-1, which requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the financial statements particularly for transactions related to derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. The new disclosure requirements will be effective for annual reporting periods beginning on or after January 1, 2013. The new disclosures will be required for all prior comparative periods presented. The Trust has evaluated this new guidance and its adoption did not have a material impact on its consolidated financial statements.