01-31-2011, 05:01 AM
Dear Kamran
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />The presumption that assets bring more revenues in initial years and it keeps on reducing with the passage of time, is bit logical but is rebuttable as well.
We see that when new plants/industries are established, these have lesser market share, lesser revenues, more advert costs, more financing costs etc; so in such cases larger amount of depreciation would not bring good picture of the affairs.
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This may only be true for an entity undertaking a new business. For new plants installed by existing industries normally their performance deteriorates over time hence reducing balance method may be more realistic estimate.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />
Further, using either straight line or reducing balance has nothing to do with any exemption from deferred taxation calculations. Two basis can alter the figures to be arrived at; but none of them outways the requirements to provide for deferred taxation. Whatever method you use, the taxable differences would always arise due to accelerated allowances given by tax laws against the accounting rates.
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Not taking into account initial depreciation allowance if any and using depreciation rates as provided by tax laws as accounting rates for depreciating assets can there be a deferred tax liability?
Through this discussion I wanted to know the factors to be considered while adopting method for depreciating assets. And your points have been useful.
Regards
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />The presumption that assets bring more revenues in initial years and it keeps on reducing with the passage of time, is bit logical but is rebuttable as well.
We see that when new plants/industries are established, these have lesser market share, lesser revenues, more advert costs, more financing costs etc; so in such cases larger amount of depreciation would not bring good picture of the affairs.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
This may only be true for an entity undertaking a new business. For new plants installed by existing industries normally their performance deteriorates over time hence reducing balance method may be more realistic estimate.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />
Further, using either straight line or reducing balance has nothing to do with any exemption from deferred taxation calculations. Two basis can alter the figures to be arrived at; but none of them outways the requirements to provide for deferred taxation. Whatever method you use, the taxable differences would always arise due to accelerated allowances given by tax laws against the accounting rates.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Not taking into account initial depreciation allowance if any and using depreciation rates as provided by tax laws as accounting rates for depreciating assets can there be a deferred tax liability?
Through this discussion I wanted to know the factors to be considered while adopting method for depreciating assets. And your points have been useful.
Regards
