Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Basis of Presentation and Summary of Significant Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The balance sheet at December 31, 2010, has been derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. Certain 2010 financial statement amounts have been reclassified to conform to the 2011 presentation, including adjustments for discontinued operations.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their consolidated entities. We consolidate all variable interest entities for which we are the primary beneficiary. Generally, we consolidate real estate partnerships and other entities that are not variable interest entities when we own, directly or indirectly, a majority voting interest in the entity or are otherwise able to control the entity. All significant intercompany balances and transactions have been eliminated in consolidation.

Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are reflected in the accompanying balance sheets as noncontrolling interests in Aimco Operating Partnership. Interests in partnerships consolidated into the Aimco Operating Partnership that are held by third parties are reflected in the accompanying balance sheets as noncontrolling interests in consolidated real estate partnerships. The assets of consolidated real estate partnerships owned or controlled by us generally are not available to pay creditors of Aimco or the Aimco Operating Partnership.

As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a partner in a limited partnership or a member in a limited liability company.

Variable Interest Entities

We consolidate all variable interest entities for which we are the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. Refer to Note 5 for further discussion of our variable interest entities.

Equity (including Noncontrolling Interests)

The following table presents a reconciliation of our consolidated temporary equity accounts from December 31, 2010 to September 30, 2011 (in thousands):

	Preferred
	noncontrolling			Preferred stock
	interests in Aimco			subject to
	Operating			repurchase
	Partnership			agreement
Balance, December 31, 2010	$	83,428		$	20,000
Preferred distributions		(5,012	)		—
Redemption of preferred units		(43	)		—
Repurchase of preferred shares		—			(10,000	)
Net income		5,012			—
Balance, September 30, 2011	$	83,385		$	10,000

The following table presents a reconciliation of our consolidated permanent equity accounts from December 31, 2010 to September 30, 2011 (in thousands):

				Noncontrolling			Common
				interests in			noncontrolling
				consolidated real			interests in
	Aimco			estate			Aimco Operating			Total
	Equity			partnerships			Partnership			Equity
Balance, December 31, 2010	$	1,046,042		$	291,458		$	(30,728	)	$	1,306,772
Contributions		—			12,358			—			12,358
Issuance of common stock		72,012			—			—			72,012
Issuance of preferred stock		19,028			—			—			19,028
Redemptions and repurchases of preferred stock		(18,567	)		—			—			(18,567	)
Preferred stock dividends		(37,390	)		—			—			(37,390	)
Common dividends and distributions		(43,075	)		(32,974	)		(3,021	)		(79,070	)
Repurchases of common units		—			—			(4,831	)		(4,831	)
Amortization of stock based compensation cost		4,725			—			—			4,725
Stock option exercises		1,806			—			—			1,806
Effect of changes in ownership for consolidated entities (Note 4)		(43,085	)		14,124			14,827			(14,134	)
Change in accumulated other comprehensive loss		(6,236	)		(402	)		(604	)		(7,242	)
Other		205			45			—			250
Net loss		(44,153	)		(4,612	)		(5,838	)		(54,603	)
Balance, September 30, 2011	$	951,312		$	279,997		$	(30,195	)	$	1,201,114

Comprehensive Income or Loss

As discussed in Note 4, we have investments classified as available for sale which are measured at fair value with unrealized gains or losses recognized as an adjustment of accumulated other comprehensive loss within equity. Additionally, as discussed in Note 6, we recognize changes in the fair value of our cash flow hedges as changes in accumulated other comprehensive loss within equity. Our consolidated comprehensive loss for the three months ended September 30, 2011 and 2010, totaled $3.3 million and $30.3 million, respectively, and for the nine months ended September 30, 2011 and 2010, totaled $56.8 million and $59.2 million, respectively, before the effects of noncontrolling interests.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, or ASU 2011-05, which revises the manner in which companies present comprehensive income. Under ASU 2011-05, companies may present comprehensive income, which is net income adjusted for the components of other comprehensive income, either in a single, continuous statement of comprehensive income or by using two separate but consecutive statements. Regardless of the alternative chosen, companies must display adjustments for items reclassified from other comprehensive income into net income within the presentation of both net income and other comprehensive income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. We are currently evaluating the effect ASU 2011-05 will have on our consolidated financial statements and have not yet determined which method of presentation we will elect.

Concentration of Credit Risk

At September 30, 2011, we had total rate of return swap positions with two financial institutions totaling $144.7 million. We periodically evaluate counterparty credit risk associated with these arrangements. In the event either counterparty were to default under these arrangements, loss of the net interest benefit we generally receive under these arrangements, which is equal to the difference between the fixed rate we receive and the variable rate we pay, may adversely impact our results of operations and operating cash flows. However, at the current time, we have concluded we do not have material exposure.

Income Taxes

In March 2008, we were notified by the Internal Revenue Service, or the IRS, that it intended to examine the 2006 Federal tax return for the Aimco Operating Partnership. During June 2008, the IRS issued AIMCO-GP, Inc., the general partner and tax matters partner of the Aimco Operating Partnership, a summary report including the IRS’s proposed adjustments to the Aimco Operating Partnership’s 2006 Federal tax return. In addition, in May 2009, we were notified by the IRS that it intended to examine the 2007 Federal tax return for the Aimco Operating Partnership. During November 2009, the IRS issued AIMCO-GP, Inc. a summary report including the IRS’s proposed adjustments to the Aimco Operating Partnership’s 2007 Federal tax return. These matters are currently pending administratively before IRS Appeals and the IRS has made no determination. We do not expect the 2006 or 2007 proposed adjustments to have any material effect on our unrecognized tax benefits, financial condition or results of operations.

In October 2011, we were notified by the IRS that it intends to examine refund claims related to the carry back of our taxable REIT subsidiary’s 2009 net operating loss. We do not anticipate that this examination will result in any material effect on our unrecognized tax benefits, financial condition or results of operations.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates.