Exhibit 99.2

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Emeritus Corporation:

We have audited the accompanying consolidated balance sheets of Emeritus Corporation and subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Emeritus Corporation and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 20, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Seattle, Washington

February 20, 2014

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Emeritus Corporation:

We have audited Emeritus Corporation’s (the Company) internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Emeritus Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s report on internal control over financial reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Emeritus Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Emeritus Corporation and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated February 20, 2014 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Seattle, Washington

February 20, 2014

F-3

EMERITUS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

See accompanying Notes to Consolidated Financial Statements

F-4

EMERITUS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

See accompanying Notes to Consolidated Financial Statements

F-5

EMERITUS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

See accompanying Notes to Consolidated Financial Statements

F-6

EMERITUS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See accompanying Notes to Consolidated Financial Statements

F-7

EMERITUS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See accompanying Notes to Consolidated Financial Statements

F-8

EMERITUS CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(In thousands, except share data)

See accompanying Notes to Consolidated Financial Statements

F-9

EMERITUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

Note 1. Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies

Emeritus Corporation (“Emeritus,” the “Company,” “we,” “us” or “our”) is a senior living service provider focused on operating residential style communities throughout the United States. Our assisted living and Alzheimer’s and dementia care (“memory care”) communities provide a residential housing alternative for senior citizens who need help with the activities of daily living, with an emphasis on assisted living and personal care services. Many of our communities offer independent living alternatives and, to a lesser extent, skilled nursing care. We also offer a range of outpatient therapy and home health services in Florida, Arizona and Texas. As of December 31, 2013, we owned 186 communities and leased 311 communities. These 497 communities comprise the communities included in the consolidated financial statements and are referred to as our “Consolidated Portfolio.”

We also provide management services to independent and related-party owners of senior living communities. As of December 31, 2013, we managed 15 communities, three of which are owned by joint ventures in which we have a financial interest. The majority of our management agreements provide for fees of 5.0% of gross revenues. The communities that we manage for others, combined with our Consolidated Portfolio, are referred to as our “Operated Portfolio.”

Merger Agreement with Brookdale

On February 20, 2014, Emeritus and Brookdale Senior Living, Inc. (“Brookdale”) announced that the companies have entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Brookdale Merger Sub Corporation, a wholly owned subsidiary of Brookdale (“Merger Sub”) will merge with and into Emeritus, with Emeritus continuing as the surviving corporation and becoming a wholly owned subsidiary of Brookdale (the “Merger”). See Note 18 for further discussion.

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of Emeritus and its wholly owned subsidiaries. We do not consolidate our management contracts and certain joint ventures that we do not control. We eliminate all intercompany balances and transactions in consolidation.

Segment Information

In November 2012, we acquired Nurse On Call, Inc. (“NOC”), a home healthcare provider. Also, we began leasing 129 senior living communities in the fourth quarter of 2012 and four additional communities in the first quarter of 2013 that we had previously managed for an unconsolidated joint venture (the “HCP Transaction”) (Note 4). As a result of these transactions, Emeritus is comprised of three operating segments and reporting units, which are: (i) ancillary services, primarily NOC; (ii) the 133 communities leased in the HCP Transaction (the “HCP Leased Communities”); and (iii) the legacy Emeritus communities. See Note 15 for segment financial data.

Revision of Prior-Period Financial Statements

In the first quarter of 2013, we determined that the portions of our accruals for professional and general liability and workers’ compensation that are not expected to be paid within one year of the balance sheet date should have been classified as long-term liabilities (Note 11). The prior-period financial statements included in this filing have been revised to reflect this correction, which decreased current liabilities and increased long-term liabilities by $55.7 million as of December 31, 2012. In addition, a portion of receivables from insurance companies related to professional and general liability was reclassified, which decreased current assets and increased other assets, net, by $10.1 million as of December 31, 2012. A portion of prepaid insurance expense related to our workers’ compensation program was reclassified, which decreased current assets and increased restricted deposits and escrows by $27.4 million as of December 31, 2012.

F-10

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

In addition, certain reclassifications were made to the consolidated balance sheet as of December 31, 2012 to conform to the current-year presentation. Specifically, the current portion of accrued professional and general liability and workers’ compensation, as well as accrued health insurance, are included in accrued insurance liabilities as of December 31, 2013 and December 31, 2012. As of December 31, 2012, we reclassified $23.7 million related to workers compensation and health insurance from accrued employee compensation and benefits to accrued insurance liabilities.

In the fourth quarter of 2013, we made adjustments to certain of our deferred tax assets and liabilities and the valuation allowance. The most significant adjustments were related to presenting deferred balances related to capital leases on a gross, rather than net, basis and adjustments to fixed assets related to capital lease activity. The net impact of the adjustments was an increase in net deferred tax assets of $22.3 million and an increase in the valuation allowance of the same amount. Unlike the accrual adjustments discussed above, the 2012 financial statements have not been revised because we do not believe comparability relative to this matter is as meaningful.

Summary of Significant Accounting Policies

Cash Equivalents

Cash equivalents consist primarily of money market investments, triple-A rated government agency notes, and certificates of deposit with a maturity date at purchase of 90 days or less.

Short-Term and Long-Term Investments

We classify short-term investment securities with a readily determinable fair value as trading securities and record them at fair value. They represent the assets of our nonqualified deferred compensation plan.

Trade Accounts Receivable

The balance of trade accounts receivable, net of an allowance for doubtful accounts, represents our estimate of the amount that ultimately will be realized in cash. The allowance for doubtful accounts was $9.4 million and $7.2 million as of December 31, 2013 and 2012, respectively. We review the adequacy of our allowance for doubtful accounts on an ongoing basis using historical payment trends, write-off experience, analysis of receivable portfolios by payor source, and aging of receivables, as well as a review of specific accounts. We record adjustments to the allowance as necessary based upon the results of our review.

The balance includes home healthcare receivables attributable to our acquisition of NOC in the fourth quarter of 2012; such receivables consist primarily of services reimbursable under Medicare and are outstanding longer than our historically primarily private-pay senior living services receivables. In addition, the allowance for doubtful accounts includes Medicare contractual allowances for final amounts to be received for episodic services provided.

Activity in the allowance for doubtful accounts is as follows (in thousands):

F-11

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. We compute depreciation and amortization using the straight-line method over the estimated useful lives of the assets as follows: buildings and improvements, five to 50 years; furniture, equipment, and vehicles, three to seven years; and capital lease assets and leasehold improvements, over the shorter of the useful life or the lease term. We expense maintenance and repairs as incurred and capitalize expenditures for refurbishments and improvements that extend the useful life of an asset.

We record construction in progress at cost, which includes the cost of construction and other direct costs attributable to the construction. We do not record depreciation on construction in progress until such time as the relevant assets are completed and put into use. Construction in progress at December 31, 2013 and 2012 represents refurbishment projects at existing communities.

We capitalize certain internal software development costs. Such costs consist primarily of custom-developed software and the direct labor costs of internally-developed software. The authoritative accounting literature describes three stages of software development projects: the preliminary project stage (all costs expensed as incurred), the application development stage (certain costs capitalized, certain costs expensed as incurred), and the post-implementation/operation stage (all costs expensed as incurred). The costs capitalized in the application development stage include the costs of design, coding, and installation of hardware and software. We capitalize costs incurred during the application development stage of the project as required.

Restricted Deposits and Escrows

Restricted deposits consist of funds required by various landlords and lenders to be placed on deposit as security for our performance under the lease or debt agreements and will generally be held until the lease termination or debt maturity date, or in some instances, may be released to the Company when the related communities meet certain debt coverage and/or cash flow coverage ratios. As of December 31, 2013, restricted deposits also include a $20.9 million cash deposit to collateralize a bond related to a litigation matter (Note 11).

Investments in Unconsolidated Joint Ventures

We have investments in unconsolidated joint ventures that we account for under the equity method or cost method of accounting (Note 2). In determining the accounting treatment for these investments, we consider various factors such as the amount of our ownership interest, our voting rights and ability to influence decisions, our participating rights, and whether it is a variable interest entity and, if so, whether Emeritus is the primary beneficiary. We reevaluate each joint venture’s status quarterly or whenever there is a change in circumstances such as an increase in the entity’s activities, assets, or equity investments, among other things.

Other Intangible Assets

In connection with certain acquisitions, the Company acquires various definite and indefinite-lived intangible assets (Note 5). We amortize these assets over their estimated useful lives or the term of the related contract or lease agreement.

Asset Impairments

Goodwill. We test goodwill for impairment annually and more frequently if facts and circumstances indicate goodwill carrying values may exceed the estimated implied fair value of the Company’s goodwill. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), we have the option of performing a “qualitative” assessment to determine whether a further impairment test is necessary. As a result, we first assess a range of qualitative factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, and entity-specific factors such as strategies and financial performance, when evaluating potential impairment

F-12

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

for goodwill. If, after completing such assessment, it is determined that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, we proceed to a two-step impairment test, whereby the first step is comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered to not be impaired and the second step of the test is not performed. The second step of the impairment test is performed when the carrying amount of the reporting unit exceeds the fair value, in which case the implied fair value of the reporting unit goodwill is compared with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

As of October 31, 2013 (the date we elected as our annual goodwill impairment test effective date), Emeritus was comprised of three reporting units, which are: (i) ancillary services, primarily NOC; (ii) the 133 HCP Leased Communities; and (iii) the legacy Emeritus communities. We performed our qualitative assessment as of October 31, 2013 and determined that it was not “more likely than not” that the fair value of each of our reporting units was less than their respective applicable carrying values. Accordingly, it was not necessary to perform the two-step impairment test and no goodwill impairment was recognized in 2013.

As a part of our ongoing operations, we may sell certain communities due to their under-performance or other reasons. Under generally accepted accounting principles in the United States (“GAAP”), when a portion of a reporting unit that constitutes a business is to be disposed of, goodwill associated with the business is included in the carrying amount of the business in determining any gain or loss on disposal.

Long-Lived Assets. Long-lived assets include property and equipment, investments in unconsolidated joint ventures, and amortizable intangible assets. We review our long-lived assets for impairment whenever a change in condition occurs that indicates that the carrying amounts of assets may not be recoverable. Such changes include changes in our business strategies and plans, changes in the quality or structure of our relationships with our partners, and deteriorating operating performance of individual communities or investees. Long-lived assets, other than goodwill, are reviewed at the community level. We use a variety of factors to assess the realizable value of long-lived assets depending on their nature and use. Such assessments are primarily based upon the sum of expected future net cash flows over the expected period the asset will be utilized or held, as well as market values and conditions. Any changes in these factors or assumptions could impact the assessed value of an asset and result in an impairment charge equal to the amount by which its carrying value exceeds its estimated fair value.

Insurance Reserves

We use a combination of commercial insurance and self-insurance mechanisms to provide for the potential liabilities for certain risks, including workers’ compensation, healthcare benefits, professional and general liability, property insurance, and director and officers’ liability insurance. Liabilities associated with the risks that are retained by us are not discounted and are estimated, in part, by considering historical claims experience, demographic, exposure and severity factors, and other actuarial assumptions. If actual losses exceed the estimates, we accrue additional expense at the time of such determination.

For professional liability claims, as of December 31, 2013, we are self-insured for 267 of our 497 consolidated owned and leased communities as well as six of our managed communities, and we record losses based on actuarial estimates of the total aggregate liability for claims incurred and expected to occur. We cover losses through a self-insurance pool agreement. We deposit funds with an administrator based in part on a fixed schedule and in part as losses are actually paid. We record the funds held by the administrator as a prepaid asset, which was $1.4 million and $1.3 million as of December 31, 2013 and 2012, respectively. In the fourth quarter of 2013, the Company purchased a professional liability commercial insurance policy pertaining to self-insured communities with a retention of $5.0 million per claim and a policy limit of $15.0 million, which covers claims incurred subsequent to the initiation of this policy.

Communities not in the self-insurance pool are insured under commercial policies that provide for deductibles for each claim ranging from $50,000 to $250,000. As a result, the Company is, in effect, self-insured for claims that are less than the deductibles.

F-13

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

For health insurance, we self-insure each participant up to $350,000 per year, above which a catastrophic insurance policy covers any additional costs. We accrue health insurance liabilities based upon our historical experience of claims incurred.

We maintain workers’ compensation insurance coverage through a high deductible, collateralized insurance policy. We record the cash collateral paid under the plan as a prepaid asset and reduce the prepaid balance as claims are paid from the account by the third-party administrator. As of December 31, 2013 and 2012, the prepaid asset was $49.3 million and $40.2 million, respectively, of which $35.0 million and $27.4 million, respectively, is included in restricted deposits and escrows in the consolidated balance sheets. Premiums and the collateral requirement are adjusted annually based on an audit by the insurer. Claims and expenses incurred under the collateralized policy are shared among the participants through a self-insurance pooling agreement, which includes the managed communities, unless such communities are located in Ohio, North Dakota, Texas, Washington, or Wyoming.

For work-related injuries in Texas, we provide benefits through a qualified state-sponsored plan. We pay claim expenses as incurred and we accrue estimated losses each month based on actual payroll results. An insurance policy is in place to cover liability losses in excess of a deductible amount. In Ohio, North Dakota, Washington and Wyoming, we participate in the specific state plan and pay premiums based on a rate determined by the state.

Income Taxes

We compute income taxes using the asset and liability method. We record current income taxes based on amounts refundable or payable in the current year. We record deferred income taxes based on the estimated future tax effects of loss carryforwards and temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates that are expected to apply to taxable income in the years in which we expect those carryforwards and temporary differences to be recovered or settled. We recognize the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date. We record a valuation allowance to reduce our deferred tax assets to the amount that is “more likely than not” to be realized. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. However, in the event that we were to determine that it would be “more likely than not” that the Company would realize the benefit of deferred tax assets in the future in excess of their net recorded amounts, adjustments to deferred tax assets would increase net income in the period we made such a determination.

We recognize the tax benefit from an uncertain tax position only if it is “more likely than not” that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than 50.0% likelihood of being realized upon settlement. We classify interest and penalties related to uncertain tax positions, if any, as tax expense in our financial statements.

Leases

We determine whether to account for our leases as operating leases, capital leases, or financing obligations based on the underlying terms. Our classification criteria are based on estimates regarding the fair value of the leased communities, minimum lease payments, effective cost of funds, the economic life of the community, and certain other terms in the lease agreements. For capital leases, we record an asset at the inception of the lease based on the present value of the rental payments over the lease term, which amount may not exceed the fair value of the underlying leased property, and we record a corresponding long-term liability. We allocate lease payments between principal and interest on the lease obligation and depreciate the capital lease asset over the term of the lease. We account for properties that are sold and leased back and for which the Company has continuing involvement as financing arrangements, whereby the property remains on the consolidated balance sheets and we record a financing obligation that is generally equal to the purchase price of the properties sold. The impact on the consolidated statements of operations is similar to a capital lease. We do not include properties under operating leases on the consolidated balance sheets, and we record the rents as lease expense.

F-14

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

We account for leases with rent holiday provisions or that contain fixed payment escalators on a straight-line basis as if the lease payments were fixed evenly over the life of each lease. We capitalize out-of-pocket costs incurred to enter into lease contracts as lease acquisition costs and amortize them over the lives of the respective leases as lease expense.

Certain leases contain payment escalators based on the greater of a fixed rate or the increase in the Consumer Price Index (“CPI”) or other variable rate indices. If we have a high level of certainty that the fixed rate increase under the lease will be met, we account for lease payments on a straight-line basis using the fixed rate. The deferred straight-line rent liability on the consolidated balance sheets primarily represents the effects of straight-lining lease payments.

Deferred Gain on Sale of Communities

Deferred gain on sale of communities represents gains on certain sale-leaseback transactions. We amortize these deferred gains using the straight-line method over the terms of the associated leases when the Company has no continuing financial involvement in communities that it has sold and leased back. In cases of sale-leaseback transactions in which the Company has continuing involvement, other than normal leasing activities, we do not record the sale until such involvement terminates. See Note 4 for further discussion of the deferred gain resulting from the HCP Transaction.

Derivative Instruments

In the normal course of business, the Company’s financial results are exposed to the effect of interest rate changes so we may limit these risks by following risk management policies and procedures, including the use of derivatives. To address exposure to interest rates, we have used interest rate swap and interest rate cap agreements to fix the rate on variable-rate debt and to manage the cost of borrowing obligations.

Hedges that we report at fair value and present on the consolidated balance sheets may be characterized as either cash flow hedges or fair value hedges. We account for our derivative instruments as cash flow hedges because they address the risk associated with future cash flows of debt transactions. We did not designate them as hedging instruments for accounting purposes; therefore, we recognize the unrealized gain or loss resulting from the change in the estimated fair values in other income (expense) in the consolidated statements of operations.

Contingent Liabilities

We record contingent liability obligations if they are probable and estimable based on our best estimate of the ultimate outcome. If a legal judgment is rendered against the Company or a settlement offer is tendered, we accrue the estimated amount that we believe we will pay for the judgment or the settlement offer.

Revenue Recognition

Community revenue consists of residents’ rental and services fees and revenue from home healthcare services. We rent resident units on a month-to-month basis and recognize rent in the month residents occupy their units. To the extent residents prepay their monthly rent, we record unearned rental income. We recognize service fees paid by residents for assisted living and other related services in the period we render those services.

We also charge nonrefundable move-in fees at the time residents first occupy their unit. We defer the revenue for these fees and record them as deferred revenue on the consolidated balance sheets. We recognize the revenue over the average period of resident occupancy, estimated at an average of 20 months for 2013, 22 months for 2012, and 20 months for 2011. We receive management fees from community management contracts, and we recognize the revenue in the month in which we perform the services in accordance with the terms of the management contract. Fee arrangements under our management agreements vary, but the majority of our management agreements provide for fees of 5.0% of gross revenues.

F-15

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

Costs incurred on behalf of managed communities are comprised entirely of community operating expenses and include items such as employee compensation and benefits, insurance, and costs incurred under national vendor contracts.

Approximately 19.6%, 13.9%, and 12.8% of our community and ancillary services revenues in 2013, 2012, and 2011, respectively, were derived from governmental reimbursement programs such as Medicare and Medicaid. We record billings for services under third-party payor programs net of contractual adjustments as determined by the specific program. We accrue any retroactive adjustments when assessed, regardless of when the assessment is paid or withheld, even if we have not agreed to or are appealing the assessment. We record subsequent positive or negative adjustments to these accrued amounts in net revenues when they become known.

Stock-Based Compensation

We grant options to purchase the Company’s common stock at a price equal to the closing market price of the stock on the date of grant. We estimate the fair value of each stock option granted using the Black-Scholes option pricing model. This model requires us to make assumptions to determine expected risk-free interest rates, stock price volatility, dividend yield, and weighted-average option life. We recognize stock-based compensation expense over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional services (the vesting period). The Company’s stock incentive plans provide that awards generally vest over a four-year period. Any unexercised options expire in seven to ten years. We estimate the fair value of each grant as a single award and amortize that value on a straight-line basis into compensation expense over the grant’s vesting period.

We also grant restricted (unvested) stock to certain key executives. The fair value of the restricted shares is equal to the market price of Emeritus stock on the grant date. The shares vest over four years if certain annual performance criteria are met, and the fair value is amortized into compensation expense using the graded vesting method, subject to an assessment of whether it is probable that the performance goal will be achieved.

Discontinued Operations

In considering whether a group of assets disposed of, or to be disposed of, should be presented as a discontinued operation, we determine whether the disposed assets comprise a component of the Company. That is, we assess if the disposed assets have historic operations and cash flows that can be clearly distinguished, both operationally and for financial reporting purposes. We also determine whether the cash flows associated with the disposed assets have been, or will be, significantly eliminated from the ongoing operations of the Company as a result of the disposal transaction and whether we will have any significant continuing involvement in the operations of the disposed assets after the disposal transaction. If our determinations are affirmative, we aggregate the results of operations of the disposed assets, if material, as well as any gain or loss on the disposal transaction, for presentation separately from the continuing operating results of the Company in the consolidated financial statements. We did not reclassify the revenues and expenses of communities sold in 2013, 2012, and 2011 to loss from discontinued operations because we do not consider the corresponding results of operations to be material to the consolidated statements of operations.

Loss Per Share

We compute basic net loss per share based on weighted average shares outstanding and exclude any potential dilution. We compute diluted net loss per share based on the weighted average number of shares outstanding plus dilutive potential common shares. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and non-vested) using the treasury stock method. Dilutive potential shares are excluded from the computation of earnings per share if their effect is antidilutive.

As of December 31, 2013, 2012, and 2011, we had outstanding stock options totaling 3,989,814, 4,401,418, and 4,470,939, respectively, which were excluded from the computation of loss per share because they were antidilutive. Performance-based restricted shares, totaling 1,088,934 shares as of December 31, 2013, are included in total outstanding shares but are excluded from the loss per share calculation until the related performance criteria have been met.

F-16

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

As of December 31, 2012, the redeemable noncontrolling interest represents equity held by the minority members of NOC (“Minority Members”). We estimated the redemption value of the redeemable noncontrolling interest based on the formula specified in the NOC put/call agreement. Because the redemption value may not have fully represented fair value, and the terms of the redemption feature were not included in our attribution of net income or loss to the noncontrolling interest, we were required under GAAP to apply the two-class method for calculating net loss per share. Under the two-class method, net loss attributable to Emeritus common shareholders was adjusted for the change in the excess of the noncontrolling interest’s estimated redemption value over its measurement amount per ASC Section 480-10-S99 (i.e., acquisition fair value adjusted for dividends and attribution of net income or loss). This calculation had no material impact on our consolidated net loss per share attributable to Emeritus common shareholders. We purchased the Minority Members’ remaining interests in December 2013 (Note 4).

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This new standard requires the netting of unrecognized tax benefits (“UTB”s) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. Under the new standard, UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. ASU No. 2013-11 is effective for Emeritus beginning in the first quarter of 2014, and we do not expect that it will have a material impact on our financial statements.

In July 2012, the FASB issued ASU No. 2012-2, Testing Indefinite-Lived Intangible Assets for Impairment. In accordance with the amendments in this update, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. We adopted ASU 2012-2 effective January 1, 2013 and it did not have a material impact on our financial statements.

In June 2011, the FASB issued ASU 2011-5, Presentation of Comprehensive Income. This standard eliminates the option to report other comprehensive income (“OCI”) and its components in the statement of shareholders’ equity. Instead, an entity is required to present items of net income and other comprehensive income either in a continuous statement of net income and OCI or in two separate but consecutive statements. We adopted ASU 2011-5 beginning with our financial statements for the first quarter of 2012, and it resulted only in changes to presentation of our financial statements. In February 2013, the FASB issued ASU 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance requires entities to present, either on the face of the income statement or in the notes, the effects on the line items of the income statement for amounts reclassified out of accumulated other comprehensive income. We adopted ASU 2013-2 effective January 1, 2013, and it did not have a material impact on our financial statements or related disclosures.

Note 2. Investments in Unconsolidated Joint Ventures

Investments in unconsolidated joint ventures consist of the following (in thousands):

F-17

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

China Limited Partnership

In 2011, we began working with an entity controlled by Daniel R. Baty, a founder of the Company and Chairman of our board of directors, on potential senior housing projects in China in anticipation of a partnership or joint venture (various entities affiliated with Mr. Baty are referred to collectively in this report as Columbia Pacific). In 2012, we entered into a consulting agreement with Columbia Pacific under the terms of which we are providing systems, programmatic and operational support in connection with senior housing investment activities in China.

In October 2013, we invested $1.8 million in the Columbia Pacific China Healthcare Fund, L.P. (the “China Fund”). Columbia Pacific is the general partner and manager. As of December 31, 2013, our ownership interest in the China Fund was approximately 5.33% and when the China Fund is fully subscribed and funded, our ownership interest will be less than 2.0%. For this reason and because we have very little influence over the operating and financial policies of the China Fund, we are accounting for our investment using the cost method.

For a portion of our capital contribution to the China Fund, we were given credit for items such as operational and development know-how, processes, systems and related documentation. As a result, we realized a noncash gain on our investment of $1.0 million, which is included in other, net expense in the consolidated statement of operations for 2013.

Emeritus/Wegman Joint Ventures

Since 2005, we have entered into a number of 50% joint ventures with Wegman family entities (“Wegman”) to develop, construct and operate assisted living and memory care communities (the Wegman JVs). In 2012, we opened a 36-unit memory care community in Vestal, New York. In 2011, we opened an 81-unit assisted living and memory care community in Deerfield, Ohio, and in 2007 we opened an 81-unit assisted living and memory care community in Stow, Ohio. An additional 36-unit memory care community in Troy, New York, is in the development stage.

Under these joint venture agreements, Wegman is responsible for the development and construction of the communities, and Emeritus is the administrative member responsible for day-to-day operations for which we receive a management fee equal to the greater of $5,000 per month or 5.0% of gross operating revenues. All major decisions regarding the Wegman JVs require the consent of Wegman. We have made capital contributions to the Wegman JVs since their inception totaling $4.0 million and have received cash distributions totaling $2.8 million in 2013, $577,000 in 2012 and $1.6 million in 2011. We earned management fees, combined, of $486,000 in 2013, $341,000 in 2012 and $202,000 in 2011.

Sunwest Joint Venture

Prior to December 31, 2013, the Company held a 6.0% ownership interest in a joint venture with BRE/SW Member LLC, an affiliate of Blackstone Real Estate Advisors VI, L.P (“Blackstone”), Columbia Pacific, and certain tenant-in-common investors (the “TICs”) (the “Sunwest JV”). The Sunwest JV was formed in 2010 to acquire a portfolio of communities (the “Properties”) formerly operated by an Oregon limited liability company that was in bankruptcy.

The Sunwest JV acquired 144 Properties in 2010 for an aggregate unadjusted purchase price of approximately $1.3 billion, and the TICs rolled over their ownership interests into the Sunwest JV. The consideration included (i) approximately $279.0 million in a combination of cash and TIC membership interests in the Sunwest JV and (ii) the assumption by the Sunwest JV of secured debt of approximately $979.0 million. We contributed cash of $19.0 million.

We entered into management agreements with the Sunwest JV to manage the Properties for a fee equal to 5.0% of gross collected revenues, and we recorded management fee revenues of $168,000 in 2013, $16.1 million in 2012 and $18.0 million in 2011.

In the fourth quarter of 2012 and first quarter of 2013, in connection with the HCP Transaction (defined in Note 4), we entered into long-term lease agreements for 133 of the Properties (the “HCP Leased Communities”) in a sale-leaseback arrangement with HCP, Inc. (“HCP”) and purchased nine of the Properties (the “Emeritus Nine Communities”) outright. As a result, our investment in the Sunwest JV was reduced to zero. Final cash distributions were made to the members in 2013, of which Emeritus received approximately $49.0 million, and the Sunwest JV was dissolved.

F-18

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

2006 Blackstone Joint Venture

Until June 1, 2011, the Company held a 19.0% interest in a joint venture with an affiliate of Blackstone (the “Blackstone JV”) that acquired a total of 24 properties during 2006 and 2007. As described in detail in Note 4, on June 1, 2011, we purchased Blackstone’s equity interest in the Blackstone JV.

Combined balance sheets for our unconsolidated equity method joint ventures are as follows (in thousands):

Combined statements of operations for our unconsolidated equity method ventures are as follows (in thousands):

F-19

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

Note 3. Property and Equipment

Property and equipment consisted of the following (in thousands):

Property and equipment under capital leases and financing obligations included in the above schedule consist of the following at December 31 (in thousands):

Depreciation and amortization for capital leases and financing obligations was approximately $96.6 million, $52.7 million, and $44.3 million for 2013, 2012, and 2011, respectively.

Note 4. Acquisitions and Other Significant Transactions

We make acquisitions of certain businesses and complete other transactions from time to time that we believe align with our strategic intent to, among other factors, enhance the overall care of our residents as well as maximize our revenues, operating income, and cash flows.

In September 2013, we acquired 38 communities pursuant to an operating lease with Health Care REIT, Inc. (“HCN”) (the “Master Lease”). These communities were previously operated by Merrill Gardens (the “Merrill Gardens Communities”). Rent in the first year of the Master Lease is $54.0 million and will increase each year based on the greater of (i) the percentage change in the CPI or (ii) (a) 4.0% in the second year of the lease and (b) 3.25% thereafter. Additional rent may be due beginning in the third year of the lease if gross revenues, as defined therein, exceed certain thresholds. The initial term of the Master Lease is fifteen years, and we have the option to extend the lease for one additional fifteen-year term. HCN and Emeritus have committed to fund up to $10.0 million for capital improvements during the first two years of the Master Lease, and our rent will increase by 6.5% of any such capital improvements funded by HCN. The Company also entered into an operations transfer agreement with Merrill Gardens, pursuant to which we paid to Merrill Gardens a $10.0 million management contract termination fee upon commencement of the Master Lease.

In July 2013, we entered into a fifteen-year lease for a 76-unit assisted living community in Ohio. Base rent is initially $1.1 million per year, increasing by 3.0% annually. We have options for three additional five-year terms. We are accounting for this transaction as an operating lease.

In June 2013, we sold one community to HCP and leased it back from HCP. The sale price was $18.0 million and we used $13.0 million of the proceeds to pay down mortgage debt. The lease with HCP is for an initial term of 15 years, with options for two additional ten-year terms. Because of continuing involvement in the property in the form of a purchase option, we are accounting for the lease as a financing lease, and therefore recorded the $18.0 million of sales proceeds as a financing lease obligation.

F-20

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

In June 2013, we extended the term of a community operating lease for an additional 15 years, with two ten-year extensions available. In addition, we amended our right to exercise the purchase option on the property in exchange for a $6.1 million cash payment from the lessor, which represented the difference between the current market value of the property and the purchase option price. The amended lease provides us with an option to purchase the community beginning in 2020.

In April 2013, we purchased a 20-unit assisted living community that we previously leased from Ventas, Inc. (“Ventas”) (Note 6). The purchase price was $3.9 million, and we accounted for the transaction as an asset purchase.

In March 2013, we entered into a 15-year lease for a 118-unit assisted living community in California. Base rent is initially $1.8 million per year, increasing by 3.0% annually. We have the option to extend the lease term for an additional ten years. We are accounting for this transaction as an operating lease.

2012 HCP Transaction

Until late 2012, the Company held a 6.0% ownership interest in the Sunwest JV (Note 2). In October 2012, the Sunwest JV entered into a purchase and sale agreement with Emeritus and HCP, whereby the Sunwest JV agreed to sell to HCP 142 of its Properties, 133 of which were then leased to Emeritus and nine were sold to Emeritus for $62.0 million (the “HCP Transaction”), with $52.0 million financed with a loan from HCP (the “HCP Loan”). The HCP Leased Communities are operated by Emeritus under lease agreements with HCP (collectively, the “HCP Lease”) and became, at the date of closing, part of the Company’s Consolidated Portfolio. The Emeritus Nine Communities continue to be operated by Emeritus, except for one that is managed by an unrelated third party. During 2013, we sold four of the Emeritus Nine Communities and used the combined net proceeds of $18.2 million to pay down the HCP Loan.

At the initial closing on October 30, 2012, the Sunwest JV sold 136 of the 142 Properties to HCP, which included the Emeritus Nine Communities that Emeritus then purchased from HCP. At the second closing on December 4, 2012, HCP purchased two more of the Properties, which were included in the HCP Leased Communities and became part of the HCP Lease as of that date. In the first quarter of 2013, the Sunwest JV closed on the sale of the remaining four HCP Leased Communities and they were added to the HCP Lease. The aggregate sales price payable to the Sunwest JV for the Properties was $1.8 billion.

Final distributions were made by the Sunwest JV to its members in 2013 and Emeritus received, in total, cash of approximately $139.0 million ($89.7 million of which was received in 2012), comprised of approximately $45.0 million for the Company’s ownership interest in the Sunwest JV and a promote incentive payment of approximately $94.0 million based on the final rate of investment return to the Sunwest JV’s investors.

We are accounting for the HCP Lease as a financing obligation and our acquisition of the Emeritus Nine Communities as an asset purchase. Due to our ownership interest in the Sunwest JV, we are accounting for the acquisition of the HCP Leased Communities as a sale and leaseback. Because we currently expect to exercise all renewal options, we will have substantial continuing involvement in the HCP Leased Communities. As a result, in accordance with GAAP, we deferred the gain associated with our equity interest in the Sunwest JV and include it in the lease financing obligation. Lease payments are recorded to interest expense and the lease financing obligation using the effective interest method. As of December 31, 2013, the deferred gain was $126.6 million, which represents our share of the cash proceeds from the sale through December 31, 2013, including the promote incentive, net of our investment in the Sunwest JV.

2013 Dispositions

In the fourth quarter of 2013, we sold two communities with a total of 203 units and used the aggregate net sales proceeds of $8.0 million to pay off the related mortgage debt. We did not renew the lease on one community with 46 units. In the third quarter of 2013, we sold two communities representing a total of 185 units. Aggregate net sales proceeds of $8.9 million were used to pay down outstanding debt. In the second quarter of 2013, we sold two communities and terminated the lease on one community, representing a total of 194 units. Aggregate sales proceeds of $7.3 million were used to pay down outstanding debt. Impairment charges related to properties sold in 2013 and properties held for sale as of December 31, 2013 totaled $11.3 million for the year ended December 31, 2013, which are included in loss from discontinued operations.

F-21

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

2012 Nurse On Call Acquisition and 2013 Buy-Out Agreement

In November 2012, we purchased Nurse On Call, Inc., the largest Medicare-licensed provider of home healthcare services in Florida. We paid cash of $102.9 million (net of cash acquired) for 91.0% of the equity of NOC’s parent company, and the remaining equity was initially owned by the Minority Members, comprised of certain members of NOC’s management team. We acquired NOC in order to increase our service offerings to seniors, with the goal of expanding this platform beyond Florida. During the first quarter of 2013, the Minority Members received a $3.9 million distribution from the proceeds of a $50.0 million credit facility that NOC entered into in February 2013 (Note 5). We recorded this distribution as a reduction to additional paid-in capital.

In connection with the NOC acquisition, we entered into a put/call agreement, whereby the Minority Members had the right to require us to purchase certain of their equity interests beginning on January 1, 2016 (or earlier upon the occurrence of certain events). Likewise, we had the right to require any of the Minority Members to sell certain of their equity interests to us beginning on January 1, 2016 (or earlier, if any of the Minority Members cease to be an employee). The purchase price was based on a formula specified in the put/call agreement.

In December 2013, we entered into a buy-out agreement with the Minority Members, which resulted in the termination of the put/call agreement and our purchase of all of the Minority Members’ equity interests. The purchase price was approximately $10.1 million. We paid cash of $5.1 million at signing and will make a second payment of approximately $5.0 million in 2014. The second payment is subject to a true-up adjustment, which is based on the change in the valuation of NOC as determined by a specified formula in the buy-out agreement.

As of December 31, 2012, because the minority members still had a put right on that date, the equity held by the Minority Members was classified on the consolidated balance sheet as redeemable noncontrolling interest, which was outside of our permanent equity. The balance of redeemable noncontrolling interest as of December 31, 2012 was $10.1 million, which represented the estimated redemption value as of that date.

2011 Blackstone JV Acquisition

On June 1, 2011, Emeritus and an affiliate of Blackstone completed the transactions whereby we acquired Blackstone’s equity interest in the Blackstone JV (Note 2), which owned 24 assisted living communities (the “Blackstone JV Communities”) comprised of approximately 1,897 units. Blackstone owned an 81.0% interest and we owned a 19.0% interest in such joint venture. We previously accounted for our 19.0% interest in the Blackstone JV as an equity method investment.

We previously operated the Blackstone JV Communities on behalf of the Blackstone JV under management agreements between us and each of the Blackstone JV Communities (the “Blackstone JV Management Agreements”). As a result of the completion of the acquisition of the Blackstone JV Communities, each of the Blackstone JV Management Agreements was terminated. The Blackstone JV Management Agreements provided for management fees equal to 5.0% of gross collected revenues. We earned management fees of approximately $1.5 million in the year ended December 31, 2011 related to these agreements. The Blackstone JV Communities incurred no management fee expense from us subsequent to June 1, 2011, and our management fee revenue and the Blackstone JV management fee expense have been eliminated in the pro forma operating results below.

F-22

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

Pro Forma NOC and Blackstone JV

The following table sets forth the effect on our results of operations had the acquisition of NOC and the Blackstone JV Communities occurred as of January 1, 2011, excluding a related $42.1 million gain on acquisition (in thousands, except per share):

Other business combinations in 2013, 2012 and 2011 were not material to our consolidated financial statements. Therefore, we have not disclosed pro forma financial information related to these acquisitions.

Other 2011 Acquisitions and Dispositions

During 2011, we purchased six assisted living communities with a total of 536 units. The aggregate purchase price was $83.0 million and we financed these purchases with mortgage debt totaling $62.4 million and cash on hand. We accounted for these acquisitions as business combinations.

During 2011, we sold eight communities with a total of 825 units and used the net proceeds to retire the related mortgage debt.

Note 5. Goodwill and Other Intangible Assets and Liabilities

Goodwill

We recorded goodwill and various other intangible assets in connection with acquisitions accounted for as business combinations (Note 4). Additionally, we recorded reductions of goodwill as a result of sales of communities. The change in the carrying value of goodwill during 2013 and 2012 is set forth below (in thousands):

F-23

EMERITUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2013, 2012, and 2011

Other Intangible Assets and Liabilities

Our intangible assets and liabilities other than goodwill consisted of the following as of December 31, 2013 (in thousands):

In connection with our acquisition of NOC, we recorded intangible assets for Medicare licenses, trade name, distribution relationships, and non-solicitation agreements. We believe that the Medicare licenses and the NOC trade name have indefinite lives, and therefore we are not amortizing these assets but will test them for impairment as required by GAAP. We are amortizing the distribution relationship and non-solicitation agreement intangibles over their estimated useful lives of ten years and two years, respectively.

Our intangible assets and liabilities other than goodwill consisted of the following as of December 31, 2012 (in thousands):