Simon 2021 Annual Report

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process for purchase accounting for the investment in TRG, including controls over management’s review of the assumptions described above. To test the Company’s purchase accounting for the investment in TRG, we performed audit procedures that included, among others, assessing the methodologies used in the valuation models, evaluating the assumptions used by management in its allocation of the purchase price to the various components of excess investment, and testing the completeness and accuracy of the underlying data supporting the assumptions. We compared significant assumptions used to external market data to assess whether the assumptions were market supported. We involved our valuation specialists to assist in the assessment of the methodology utilized by the Company and to test certain of the assumptions including capitalization rates and the valuation of land. We also compared the forecasted cash flows and operating income before depreciation and amortization used in the valuations to historical actual results and market-supported data, evaluated significant variances, including consideration of the current economic environment, and performed certain sensitivity analyses to evaluate the impact on the purchase accounting allocations. We also tested the completeness and accuracy of the underlying data included in the valuation models. At December 31, 2021, the Company’s consolidated net investment properties totaled $22.3 billion. In addition, a significant number of the Company’s investments in unconsolidated entities and its investments in Klépierre and TRG hold investment properties. As discussed in Note 3 to the consolidated financial statements, the Company reviews investment properties for impairment on a property-by-property basis to identify and evaluate events or changes in circumstances that indicate the carrying value of an investment property may not be recoverable. The Company estimates undiscounted cash flows of an investment property using observable and unobservable inputs such as historical and forecasted cash flows, operating income before depreciation and amortization, estimated capitalization rates, leasing prospects and local market information. Auditing management’s evaluation of investment properties for impairment was complex due to the estimation uncertainty in determining the undiscounted cash flows of an investment property. In particular, the impairment evaluation for investment properties was sensitive to significant assumptions such as forecasted cash flows and operating income before depreciation and amortization, and capitalization rates, all of which can be affected by expectations about future market or economic conditions, demand, and competition. Evaluation of Investment Properties for Impairment

How We Addressed the Matter in Our Audit

Description of the Matter

80