As the market for real estate investment trusts continues to grow, it is critical that individuals have access to accurate and impartial data to make informed investment decisions. One important non-GAAP measure is NAREIT Funds from Operations (FFO), which is used by REITs to measure operating performance.. NAREIT FFO is generally calculated by adding depreciation and amortization related to real estate to GAAP net income. For the full definition of NAREIT FFO, please refer to the NAREIT FFO Whitepaper and related implementation guidance.
The Securities and Exchange Commission recognizes NAREIT FFO as the standard non-GAAP measure for the real estate industry, and requires companies that report different forms of FFO (e.g., adjusted FFO, normalized FFO, company FFO, etc.) to reconcile those measures to NAREIT FFO in addition to net income.
FFO is not intended to be used as a measure of the cash generated by a REIT nor of its dividend paying capacity. NAREIT feels that statements of cash flows provided for by GAAP financial statements are adequate for analysts to assess the cash generated and used by REITs.
NAREIT is committed to increasing the use of NAREIT-defined FFO and improving the understandability and uniformity of FFO estimates. In recent years, NAREIT has urged member companies that provide FFO guidance related to a company-defined version of FFO to provide guidance on NAREIT-defined FFO as well.
STATUS: Not a legislative issue.
- NAREIT FFO White Paper - 4/05/02
Related Implementation Guidance:
- NAREIT SFO Alert: NAREIT Modifies the FFO Definition to Also Exclude Impairment Write-Downs of Investments in In Substance Real Estate Investees Under Certain Circumstances - 1/6/12
- NAREIT SFO Alert: Further Guidance on Reporting FFO - 11/4/11
- NAREIT SFO Alert: Updated Guidance on Reporting FFO, Write-Downs for Impairment - 10/31/11
- NAREIT SFO Report: SEC Issues a Compliance and Disclosure Interpretation Referring to FFO - 1/29/10
- NAREIT National Policy Bulletin: FFO White Paper Disclosures (Updated) - 2/04
- Excerpt from Real Estate Accounting Quarterly, July 2000: FFO Guidance on Impairment Losses and Taxes Associated with Asset Dispositions (Updated) - 2/04
- SEC Staff Clarifies Further Guidance on Reporting FFO (Updated) - 2/04
- NAREIT Financial Reporting Alert: SEC Staff Clarifies Guidance on FFO Reporting - 7/7/03
- NAREIT Financial Reporting Alert: SEC Staff Issues Guidance on FFO Reporting - 6/20/03
- SEC Rule Retains Use of Non-GAAP Per Share Measures - 1/15/03
- Accounting for GAAP Discontinued Operations in FFO; Impact of FASB Statement No.144 - 4/5/02
- Exclusion of GAAP Extraordinary Items from FFO; Potential Impact of FASB Statement No.145 - 2/14/02
- National Policy Bulletin: Guidelines for Reporting FFO on a Per Share Basis - 7/8/99
- National Policy Bulletin: Guidance on Including Non-recurring as well as Recurring Items in FFO - 11/8/99
- NAREIT members only. Please log in at the prompt or click here for membership information.