CFA Practice Question
Why would a firm use accelerated depreciation for tax purposes and straight-line for financial reporting?
A. It is required by federal law.
B. This always increases stock price, which always increases management compensation.
C. This reduces current taxes and increases accounting income.
User Contributed Comments 2
| User | Comment |
|---|---|
| jpducros | Isn't there a Differed tax that would compensate the gain on the accelerated depreciation, and thus bring a constant accounting income ? |
| teje | income tax expense = taxes payable + change in DTL - change in DTA ... I can see where you are coming from. I guess it depends on what the current change is in DTL, as it is composed of previous deferred taxes. |