Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Basis of Presentation | ' |
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Basis of presentation |
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The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of the Company, and all of its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that the Company has control of the entity, in which case the entity would be consolidated. The Company had one joint venture investment accounted for using the equity method as of December 31, 2013. This joint venture did not exist at December 31, 2012. |
Cash and Cash Equivalents and Restricted Cash | ' |
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Cash and cash equivalents and restricted cash |
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Cash and cash equivalents are comprised of cash and short-term investments with maturities of three months or less when purchased. At times, the Company may have deposits with institutions in excess of federally insured limits. We monitor the cash balances in our bank accounts and adjust the balance as appropriate. To date, we have experienced no loss or lack of access to our invested cash or cash equivalents; however we can provide no assurance that access to our cash and cash equivalents will not be impacted by adverse conditions in the financial market. At December 31, 2013 and 2012, the Company had restricted cash of $2.5 million and $3.2 million, respectively which includes $2.0 million and $3.0 million in deposits, respectively, with an insurance provider as security for future claims. |
Real Estate Inventories | ' |
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Real estate inventories |
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Real estate inventories include land, land development costs, construction and other costs. Real estate held for development and use is stated at cost, or when circumstances or events indicate that the real estate is impaired, at estimated fair value. Real estate held for sale is carried at the lower of cost or fair value less estimated costs to sell. Land, land development and indirect land development costs are accumulated by specific project and allocated to various units within that project using specific identification and allocation based upon the relative sales value, unit or area methods. Direct construction costs are assigned to units based on specific identification. Construction costs primarily include direct construction costs and capitalized field overhead. Other costs are comprised of fees, capitalized interest and real estate taxes. Costs incurred to sell real estate are capitalized to the extent they are reasonably expected to be recovered from the sale of the project and are tangible assets or services performed to obtain regulatory approval of sales. Other selling costs are expensed as incurred. |
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If the project is considered held for sale, it is valued at the lower of cost or fair value less estimated selling costs. The evaluation takes into consideration the current status of the property, various restrictions, carrying costs, costs of disposition and any other circumstances that may affect fair value including management’s plans for the property. For assets held for development and use, a write-down to estimated fair value is recorded when the net carrying value of the property exceeds its estimated undiscounted future cash flows. Estimated fair value is based on comparable sales of real estate in the normal course of business under existing and anticipated market conditions. These evaluations are made on a property-by-property basis whenever events or changes in circumstances indicate that the net book value may not be recoverable. |
Capitalized Interest and Real Estate Taxes | ' |
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Capitalized interest and real estate taxes |
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Interest and real estate taxes incurred relating to the development of lots and parcels are capitalized to real estate inventories during the active development period, which generally commences when borrowings are used to acquire real estate assets and ends when the properties are substantially complete or the property becomes inactive. A project becomes inactive when development and construction activities have been suspended indefinitely. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest and real estate taxes capitalized to real estate inventories are expensed as a component of cost of sales as related units are sold. The following table is a summary of interest and real estate taxes incurred and capitalized and interest and real estate taxes expensed for units settled: |
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| | Twelve Months Ended December 31 | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Total interest incurred and capitalized | | $ | 1,884 | | | $ | 351 | | | | | | | | | |
Total real estate taxes incurred and capitalized | | | 181 | | | | 150 | | | | | | | | | |
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Total interest and real estate taxes incurred and capitalized | | $ | 2,065 | | | $ | 501 | | | | | | | | | |
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Interest expensed as a component of cost of sales | | $ | 2,146 | | | $ | 2,065 | | | | | | | | | |
Real estate taxes expensed as a component of cost of sales | | | 311 | | | | 189 | | | | | | | | | |
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Interest and real estate taxes expensed as a component of cost of sales | | $ | 2,457 | | | $ | 2,254 | | | | | | | | | |
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When a project becomes inactive, its interest, real estate taxes and indirect production overhead costs are no longer capitalized but rather expensed in the period in which they are incurred. Following is a breakdown of the interest, real estate taxes and indirect costs expensed related to inactive projects reported in real estate inventories: |
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| | Twelve Months Ended December | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Total interest incurred and expensed for inactive projects | | $ | 73 | | | $ | 1,940 | | | | | | | | | |
Total real estate taxes incurred and expensed for inactive projects | | | 49 | | | | 170 | | | | | | | | | |
Total production overhead incurred and expensed for inactive projects | | | 286 | | | | 179 | | | | | | | | | |
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| | | 408 | | | | 2,289 | | | | | | | | | |
Amounts reclassified to discontinued operations | | | — | | | | (154 | ) | | | | | | | | |
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| | $ | 408 | | | $ | 2,135 | | | | | | | | | |
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Property, Plant and Equipment | ' |
Property, plant and equipment |
Property, plant and equipment are carried at cost less accumulated depreciation and are depreciated on the straight-line method over their estimated useful lives as follows: |
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Furniture and fixtures | | | 7 years | | | | | | | | | | | | | |
Office equipment | | | 5 years | | | | | | | | | | | | | |
Computer equipment and capitalized software | | | 3 years | | | | | | | | | | | | | |
Leasehold improvements | | | Life of related lease | | | | | | | | | | | | | |
When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from their separate accounts and any gain or loss on sale is reflected in operations. Expenditures for maintenance and repairs are charged to expense as incurred. |
Warranty Reserve | ' |
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Warranty reserve |
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Warranty reserves for units settled are established to cover potential costs for materials and labor with regard to warranty-type claims expected to arise during the typical one-year warranty period provided by the Company or within the two-year statutorily mandated structural warranty period for condominiums. Because the Company typically subcontracts its homebuilding work, subcontractors are required to provide the Company with an indemnity and a certificate of insurance prior to receiving payments for their work. Claims relating to workmanship and materials are generally the primary responsibility of the subcontractors and product manufacturers. The warranty reserve is established at the time of closing, and is calculated based upon historical warranty cost experience and current business factors. This reserve is an estimate and actual warranty costs could vary from these estimates. Variables used in the calculation of the reserve, as well as the adequacy of the reserve based on the number of homes still under warranty, are reviewed on a periodic basis. Warranty claims are directly charged to the reserve as they arise. During fiscal year 2010, the Company recorded an additional $0.6 million in warranty reserves to cover future potential costs and/or claims related to a project. In 2013, the Company settled the warranty claim for $0.2 million, releasing the Company from future warranty claims related to the project and reduced the warranty estimate by $0.4 million. The warranty reduction was recorded through homebuilding cost of sales. |
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The following table is a summary of warranty reserve activity which is included in accounts payable and accrued liabilities: |
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| | Years ended | | | | | | | | | |
December 31, | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Balance at beginning of period | | $ | 963 | | | $ | 1,009 | | | | | | | | | |
Additions | | | 262 | | | | 52 | | | | | | | | | |
Releases and/or charges incurred | | | (715 | ) | | | (98 | ) | | | | | | | | |
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Balance at end of period | | $ | 510 | | | $ | 963 | | | | | | | | | |
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Revenue Recognition | ' |
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Revenue recognition |
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The Company recognizes revenues and related profits or losses from the sale of residential properties and units, finished lots and land sales when closing has occurred, full payment has been received, title and possession of the property has transferred to the buyer and the Company has no significant continuing involvement in the property. Other revenues include revenue from land sales, rental revenue from leased multi-family units – which is recognized ratably over the terms of the respective leases, revenue from construction services – which is recognized under the percentage-of-completion method, and revenue earned from management and administrative support services provided to related parties – which is recognized as the services are provided. |
Advertising Costs | ' |
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Advertising costs |
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The total amount of advertising costs charged for the year ended December 31, 2013 was $614, of which $577 was charged to sales and marketing, $32 was charged to cost of sales and $5 was charged to general and administrative expenses. The total amount of advertising costs charged for the year ended December 31, 2012 was $168 of which $95 was charged to sales and marketing and $73 was charged to cost of sales. |
Stock Compensation | ' |
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Stock compensation |
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As discussed in Note 12, the Company sponsors stock option plans and restricted stock award plans. The Company accounts for its share-based awards pursuant to Accounting Standards Codification (“ASC”) 718, Share Based Payments. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements over the vesting period based on their fair values at the date of grant. For the year ended December 31, 2013 and 2012, total stock-based compensation cost was $616 and $1,447, respectively. Of this amount, $477 and $1,447 was charged to general and administrative expenses for the years ended December 31, 2013 and 2012, respectively, and $6 and $0 was charged to “cost of sales-other” for the years ended December 31, 2013 and 2012, respectively. For the year ended December 31, 2013, $133 was capitalized to ‘Real estate inventories’. No amount was charged to ‘Real estate inventories’ in 2012. |
Income Taxes | ' |
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Income taxes |
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Income taxes are accounted for under the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. |
Income (Loss) Per Share | ' |
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Income (Loss) per share |
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The weighted average shares and share equivalents used to calculate basic and diluted (loss) income per share for the year ended December 31, 2013 and 2012, are presented on the consolidated statement of operations. Stock options and warrants for the year ended December 31, 2013 and 2012 are included in the diluted earnings per share calculation using the treasury stock method and average market prices during the period, unless the stock option and warrants would be anti-dilutive. As a result of net losses for the year ended December 31, 2013, approximately 466 restricted stock awards, 466 stock options and 759 warrants were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. As a result of net losses for the year ended December 31, 2012, approximately 388 restricted stock awards, 196 stock options and 428 warrants were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. |
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The computation of basic and diluted shares outstanding is as follows: |
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| | Twelve Months Ended December 31, | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Computation of basic shares outstanding | | | | | | | | | | | | | | | | |
Weighted average commom shares outstanding—basic | | | 20,681 | | | | 19,970 | | | | | | | | | |
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Computation of diluted shares outstanding | | | | | | | | | | | | | | | | |
Weighted average commom shares outstanding—diluted | | | 20,681 | | | | 19,970 | | | | | | | | | |
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Comprehensive Income | ' |
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Comprehensive income |
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For the years ended December 31, 2013 and 2012, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the consolidated financial statements. |
Segment Reporting | ' |
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Segment reporting |
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We operate our business through three segments: Homebuilding, Multi-family and Real Estate Services. We are currently focused on the Washington, D.C. market. |
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For our Homebuilding operations, we develop properties with the intent that they be sold either as fee-simple properties or condominiums to individual unit buyers or as investment properties sold to private or institutional investors. Our for-sale products are designed to attract first-time, early move-up, and secondary move-up buyers. We focus on products that we are able to offer for sale in the middle price points within the markets where we operate, avoiding the very low-end and high-end products. |
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For our Multi-family segment we focus on projects ranging from approximately 75 to 200 units in locations that are supply constrained with demonstrated demand for stabilized assets. We seek opportunities in the multi-family rental market where our experience and core capabilities can be leveraged. We will either position the assets for sale when completed or operate the asset within our own portfolio. Operating the asset for our own account affords us the flexibility of converting the units to condominiums in the future. |
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Our Real Estate Services segment pursues projects in all aspects of real estate management including strategic planning, land development, entitlement, property management, sales and marketing, workout and turnaround strategies, financing and general construction. We are able to provide a wide range of construction management and general contracting services to other property owners. |
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The following disclosure includes the Company’s three reportable segments of Homebuilding, Multi-family and Real Estate Services. Each of these segments operates within the Company’s single Washington, D.C. reportable geographic market. |
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| | Homebuilding | | | Multi- | | | Real | | | Total | |
Family | Estate |
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Twelve Months Ended December 31, 2013 | | | | | | | | | | | | | | | | |
Gross revenue (1) | | $ | 53,862 | | | $ | — | | | $ | 752 | | | $ | 54,614 | |
Gross profit | | | 11,846 | | | | — | | | | 364 | | | | 12,210 | |
Operating profit from continuing operations | | | 2,623 | | | | — | | | | 388 | | | | 3,011 | |
Operating loss from discontinued operations | | | — | | | | (4 | ) | | | — | | | | (4 | ) |
Net income (loss) | | | 2,277 | | | | (4 | ) | | | 388 | | | | 2,661 | |
Total assets | | | 56,674 | | | | — | | | | 205 | | | | 56,879 | |
Depreciation and amortization | | | 686 | | | | — | | | | — | | | | 686 | |
Interest expense | | | 73 | | | | — | | | | — | | | | 73 | |
Twelve Months Ended December 31, 2012 | | | | | | | | | | | | | | | | |
Gross revenue (1) | | $ | 12,043 | | | $ | — | | | $ | 2,259 | | | $ | 14,302 | |
Gross Income | | | 724 | | | | — | | | | 402 | | | | 1,126 | |
Operating (loss) income from continuing operations | | | (12,285 | ) | | | — | | | | 278 | | | | (12,007 | ) |
Operating profit from discontinued operations | | | — | | | | 6,368 | | | | — | | | | 6,368 | |
Net (loss) income | | | (12,285 | ) | | | 6,368 | | | | 278 | | | | (5,639 | ) |
Total assets | | | 36,378 | | | | 278 | | | | 2,043 | | | | 38,699 | |
Depreciation and amortization | | | 1,487 | | | | — | | | | — | | | | 1,487 | |
Interest expense | | | 1,775 | | | | — | | | | — | | | | 1,775 | |
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-1 | Gross revenue includes ‘Revenue – homebuilding’ and ‘Revenue – other’ as described in the consolidated statements of operations for assets included in each segment. | | | | | | | | | | | | | | | |
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The Company allocates sales, marketing and general and administrative expenses to the individual segments based upon specifically allocable costs and, in the absence of direct allocations, based upon its estimate of time allocable to the segment or based upon overall pro rata revenue generation. |
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The table below reconciles the segment information to the corresponding amounts in the accompanying consolidated statements of operations: |
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| | Twelve Months Ended | | | | | | | | | |
| | December 31, | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Segment operating income (loss) from continuing operations | | $ | 3,011 | | | $ | (12,007 | ) | | | | | | | | |
Income tax (expense) benefit | | | (346 | ) | | | 2,484 | | | | | | | | | |
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Income (loss) from continuing operations | | $ | 2,665 | | | $ | (9,523 | ) | | | | | | | | |
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Segment operating (loss) income from discontinued operations | | $ | (4 | ) | | $ | 6,368 | | | | | | | | | |
Income tax expense | | | — | | | | (2,484 | ) | | | | | | | | |
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(Loss) income from discontinued operations | | $ | (4 | ) | | $ | 3,884 | | | | | | | | | |
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Use of Estimates | ' |
Use of estimates |
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates are utilized in the valuation of real estate inventories, valuation of deferred tax assets, capitalization of costs, consolidation of variable interest entities and warranty reserves. |
Recent Accounting Pronouncements | ' |
Recent accounting pronouncements |
In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities,” which requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. In January 2013, this guidance was amended by ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities,” which limits the scope of ASU 2011-11 to certain derivatives, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions. The guidance is effective for fiscal years beginning on or after January 1, 2013 and interim periods within those annual periods. The adoption of this guidance, which is related to disclosure only, did not materially impact our consolidated financial statements. |
In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a similar Tax Loss, or a Tax Credit Carryforward Exists”. ASU 2013-11 which states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain defined exceptions. ASU 2013-11 is intended to end inconsistent practices regarding the presentation of a unrecognized tax benefits when a net operating loss (NOL), a similar tax loss or a tax credit carryforward is available to reduce the taxable income or tax payable that would result from the disallowance of a tax position. We adopted this guidance during fiscal year 2013. The adoption of ASU 2013-11 did not materially impact on our consolidated financial statements. |
In April 2013, the FASB issued ASU 2013-04, “Liabilities”, (“ASU 2013-04”). ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. ASU 2013-04 will be effective for our fiscal year beginning January 1, 2014 and subsequent interim periods. The adoption of ASU 2013-04 is not expected to have a material effect on our consolidated financial statements. |
Other accounting pronouncements issued or effective during the year ended December 31, 2013 are not applicable to us and are not anticipated to have an effect on our consolidated financial statements. |
Consolidation Of Entities | ' |
The Company does not share in an allocation of either the profit earned or loss incurred by any of these entities with which the Company has fixed price purchase agreements. The Company has concluded that whenever it options land or lots from an entity and pays a significant non-refundable deposit as described above, a variable interest entity is created under the provisions of ASC 810-10, Consolidation. This is because the Company has been deemed to have provided subordinated financial support, which creates a variable interest which limits the equity holder’s returns and may absorb some or all of an entity’s expected theoretical losses if they occur. The Company, therefore, examines the entities with which it has fixed price purchase agreements for possible consolidation by the Company under the provision of ASC 810-10. |
Discontinued Operations | ' |
As described in Note 3, on March 7, 2012, the Company’s subsidiary sold the Cascades Multi-family units. As the Cascades Multi-family units represented a component of the Company’s business, the consolidated financial statements have been reclassified for all periods presented to appropriately reflect the discontinued operations of the Cascades Multi-family units and the continuing operations of the Company. Revenues, costs and expenses directly associated with the Cascades Multi-family units have been reclassified as discontinued operations in the consolidated statements of operations. Corporate expenses, such as general corporate overhead, have not been allocated to discontinued operations. The guidance in ASC 740-20-45-7 requires that the income recorded in discontinued operations be considered when determining the amount of benefit allocable to continuing operations in circumstances when continuing operations result in a net loss position for the period presented. Accordingly, the Company has allocated a tax benefit of $2.5 million to continuing operations and a tax expense of $2.5 million to discontinued operations for the year ended December 31, 2012. No tax benefit or expense in relation to discontinued operations was recorded for the year ended December 31, 2013. |
Fair Value Measurements | ' |
ASC 820 establishes a framework for measuring fair value, expands disclosures regarding fair value measurements and defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. |