JJS Corporation purchased a building on January 1, 2007, for a total of $12,000,000. The building has

Question:

JJS Corporation purchased a building on January 1, 2007, for a total of $12,000,000. The building has been depreciated using the straight-line method with a 20-year useful life and no residual value. As of January 1, 2011, JJS is evaluating the building for possible impairment. The building has a remaining useful life of 12 years and is expected to generate cash inflows of $850,000 per year. The estimated fair value of the building on January 1, 2011, is $6,800,000.

Instructions:

1. Determine whether the building is impaired as of January 1, 2011. Make your determination using the provisions of both U.S. GAAP and IAS 36. Compare your answers.

2. Assume that JJS uses U.S. GAAP. Compute depreciation expense for 2011.

3. Assume that JJS is a non-U.S. company and uses international accounting standards. Compute depreciation expense for 2011.

4. Assume that JJS is a non-U.S. company and uses international accounting standards. Further assume that the building has a fair value of $14,000,000 on January 1, 2011, and that JJS chooses to upwardly revalue its long-term operating assets when they increase in value. Compute depreciation expense for 2011.

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... Corporation
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