Adjusted Funds From Operations - AFFO

AAA

DEFINITION of 'Adjusted Funds From Operations - AFFO'

A financial performance measure primarily used in the analysis of real-estate income trusts (REITs). The AFFO of a REIT, though subject to varying methods of computation, is generally equal to the trust's funds from operations (FFO) with adjustments made for recurring capital expenditures used to maintain the quality of the REIT's underlying assets. The calculation takes in the adjustment to GAAP straight-lining of rent, leasing costs and other material factors.

INVESTOPEDIA EXPLAINS 'Adjusted Funds From Operations - AFFO'

Regardless of how industry professionals choose to compute AFFO, it is considered a more accurate measure of residual cash flow for shareholders than simple FFO. This provides for a more accurate base number when estimating present values and a better predictor of the REIT's future ability to pay dividends. This is a non-GAAP measure.

RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Amortization

    1. The paying off of debt in regular installments over a period ...
  3. Cash Available For Distribution ...

    A real estate investment trust's (REIT's) cash on hand that is ...
  4. Funds From Operations - FFO

    A figure used by real estate investment trusts (REITs) to define ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Real Estate Investment Trust - ...

    A security that sells like a stock on the major exchanges and ...
RELATED FAQS
  1. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  2. How does the combined ratio measure the financial health of insurance companies?

    The combined ratio measures the profitability of an insurance company by examining its earned premium from its policyholders ... Read Full Answer >>
  3. What are the key barriers to entry for companies in the electronics sector?

    The electronics industry includes consumer electronics, specialized electronics for other industries and component parts ... Read Full Answer >>
  4. What is the difference between work in progress (WIP) and finished goods in accounting?

    Work in progress (WIP) and finished goods are broad classification terms used in accounting for inventory to specify the ... Read Full Answer >>
  5. Why should sunk costs be ignored in future decision making?

    A sunk cost is a cost that cannot be recovered or changed and is independent of any future costs a business may incur. Since ... Read Full Answer >>
  6. How is reconciliation treated under generally accepted accounting principles (GAAP)?

    The generally accepted accounting principles, or GAAP, provide different reconciliation rules for balancing many kinds of ... Read Full Answer >>
Related Articles
  1. Home & Auto

    How To Analyze Real Estate Investment Trusts

    REITs are much like dividend-paying companies, but analyzing them requires consideration of the accounting treatment of property.
  2. Options & Futures

    The REIT Way

    Ever considered investing in real estate? Read about the REIT and see if it's the investment for you.
  3. Home & Auto

    How To Assess A Real Estate Investment Trust (REIT)

    Find out why funds from operations is a superior measure of REIT performance.
  4. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  5. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  6. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  7. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  8. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.
  9. Economics

    What is Unearned Revenue?

    Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser.
  10. Economics

    What is a Capital Lease?

    A lease considered to have the economic characteristics of asset ownership.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center