there are very strict rules governing depreciation. many public companies have found themselves in trouble by fiddling with depreciation to fudge the books. lenders don't like it either. buildings depreciate over 30 years i think. there is a couple of ways to do it, but which ever you start with, you cannot change. the choice has to do with the use and time frame. office equipment depreciates in 3 years. standard machine tools depreciate in 8 years. some special machinery, such as that to produce automotive can be depreciated in 3 years and some in 8 years. it all can be done in either accelerated or strait line.
confusing? that's why my wife has to have an mba and undertake continuing ed. in order to keep up.
most rules regarding depreciation are changed from time to time. sometimes to close loopholes that have been taken advantage of and sometimes to create loopholes to be taken advantage of.
one of the recent changes was to allow a $25,000 deduction the first year and strait line depreciation for the remainder over seven years for machinery. the purpose was to encourage investment. to qualify though, you had to show a profit the first year. otherwise, normal depreciation rules apply.
fasb123r i think will be r'ed again. the mark to market process is cumbersome and really clouds the issues. what they've done is move future dilution into expenses. that's fine as long as the stock price is stable. what happens if the stock price falls beyond exercise price? the option becomes income.
look at depreciation as a compromise between business and the tax collector.
all things multiply to the point of starvation.
(--Budge--)
AI
