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Cases on Recognition Measurement
The "See-through" Office Building Case
"What goes down must come back up"
Dauntless Development Company owns what is referred to as a
"see-through" office building, as the glass-walled structure is
largely unoccupied and most floors are unfinished internally. The
building cost Dauntless $10 million to build and was the last
building completed during the downtown building boom. It is now 5
years old and has a carrying amount of $9 million.
Although the building is less than 30 percent occupied, management
believes there is no reason that its carrying amount will not be
recovered over the remainder of the building's expected 50-year
life. Current vacancy rates are such that there is a 15-year supply
of equivalent vacant space available in the area.
* * * *
Should the building that Dauntless owns be regarded as an
"impaired asset" and its carrying amount be written down? If so, to
what amount should it be written down?
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