Company: FRT-PC
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0000034903-25-000016
Chunk: 103

Company: FEDERAL REALTY INVESTMENT TRUST
Filing Date: 2025-02-13
Form: 10-K
Item: Item 16
Chunk 103
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 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Lease Collectibility Assessment

In order to recognize rental income on an accrual basis, the Trust must determine whether substantially all the rents due under a lease arrangement are collectible. If the Trust reaches the conclusion that substantially all of the rents are not collectible for a specific lease, then rental income under that arrangement can only be recognized when cash payment from the tenant is received.

Significant judgment is exercised by the Trust when making a collectibility assessment and includes the following considerations which require challenging and subjective auditor judgment in the execution of our audit procedures:

•Creditworthiness of the tenant

•Current economic conditions

•Historical experience with the tenant and other tenants operating in the same industry 

Our audit procedures related to the collectibility assessment included the following:

•We tested the design and tested the operating effectiveness of internal controls relating to the collectibility assessment process.

F-3

•We evaluated management’s accounting policies related to this assessment. 

•We verified the completeness of the population of tenants that management evaluated.

•We researched recent publicly available information, including information for the 10 tenants with the highest rental income recognized in the year ended December 31, 2024, such as bankruptcy filings, industry journals, and periodicals, and for any of the Trust’s tenants identified in our research, we evaluated