Is it necessary for a business to use the same method of computing depreciation in the financial statements as when determining income taxes?
2006-10-26 18:03:28 · 2 answers · asked by angel_rat_83 1 in Business & Finance ➔ Other - Business & Finance
No they are almost alway somewhat different and usually need to be reconciled along with other net income/taxable income differences on a schedule on the corporate tax return. It usually is a good idea for them to be at similar rates.
2006-10-30 01:40:00 · answer #1 · answered by Zee 6 · 0⤊ 0⤋
No you do not have to use the same method for tax returns as you do for financial statements. The method required by the IRS is determined by the type of asset, it also determines the life. But if the company management feels a different method more accurately shows the value and expense of depreciating assets they may use a longer or less aggressive formula to show higher profits. There should/would be a note in the financials statements detailing this since it also helps lower taxes in the short term.
2016-05-22 00:04:35 · answer #2 · answered by ? 4 · 0⤊ 0⤋