John Scott Snake Company purchased a building on January 1, 2004, for a total of $10,000,000. The

Question:

John Scott Snake Company purchased a building on January 1, 2004, for a total of $10,000,000. The building has been depreciated using the straight-line method with a 25- year useful life and no residual value. As of January 1, 2008, John Scott Snake is evaluating the building for possible impairment. The building has a remaining useful life of 15 years and is expected to generate cash inflows of $700,000 per year. The estimated fair value of the building on January 1, 2008, is $5,300,000.

Instructions:
1. Determine whether the building is impaired as of January 1, 2008. Make your determination using both the provisions of both U.S. and the provisions of IAS 36. Compare your answers.
2. Assume that John Scott Snake uses U.S. . Compute depreciation expense for 2008.
3. Assume that John Scott Snake is a non-U.S. company and uses International Accounting Standards. Compute depreciation expense for 2008.
4. Assume that John Scott Snake is a non-U.S. company and uses International Accounting Standards. Further assume that the building has a fair value of $11,000,000 on January 1, 2008, and that John Scott Snake chooses to upwardly revalue its long-term operating assets when they increase in value. Compute depreciation expense for 2008.

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...