FINANCIAL ACCOUNTING (ACCT2200)

Understand that the accounting method used for acquisitions depends on the extent to which the investor exerts influence over the investee.

Tax Depreciation „ Accelerated depreciation „ No judgment in determining depreciation expense „ Tax Reporting ≠ Financial Reporting ==> timing differences in measurement of income „ Why would a firm prefer accelerated depreciation for tax purposes? „ Why does government allow this? „ Why not use the tax method for financial reporting? „ Different depreciation for tax and financial reporting gives rise to Deferred Taxes