COPT Defense Properties Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Prepaid Expenses and Other Assets, Net

Prepaid Expenses and Other Assets, Net

12 Months Ended

Dec. 31, 2015

Prepaid Expense and Other Assets [Abstract]

Prepaid expenses and other assets, net consisted of the following (in thousands):



	December 31,
	2015		2014
Prepaid expenses	$	23,009	$	20,570
Lease incentives	11,133		13,344
Furniture, fixtures and equipment, net	6,004		6,637
Deferred financing costs, net (1)	5,867		4,849
Deferred tax asset, net	3,467		4,002
Construction contract costs incurred in excess of billings	3,261		6,656
Equity method investments	1,636		2,368
Other assets	5,647		2,875
Prepaid expenses and other assets, net	$	60,024	$	61,301

(1) Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.

Deferred tax asset, net reported above includes the following tax effects of temporary differences and carry forwards of our TRS (in thousands):



	December 31,
	2015			2014
Operating loss carry forward	$	5,065		$	5,012
Share-based compensation	363			976
Accrued payroll	133			195
Property	(32		)	(119		)
Valuation allowance	(2,062		)	(2,062		)
Deferred tax asset, net	$	3,467		$	4,002

We recognize a valuation allowance on our deferred tax asset if we believe all or some portion of the asset may not be realized. An increase or decrease in the valuation allowance resulting from a change in circumstances that causes a change in our judgment about the realizability of our deferred tax asset is included in income. The deferred tax asset valuation allowance is due to a decrease in future projected operating income in our TRS resulting primarily from our dispositions of certain properties to which the TRS provided amenity services and our planned reduction in amenity services provided by the TRS at certain other properties. We believe it is more likely than not that the results of future operations in our TRS will generate sufficient taxable income to realize our December 31, 2015 net deferred tax asset.