lec17_taxes - Depreciation and Deferred Taxes 15.511...

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1 Depreciation and Deferred Taxes 15.511 Corporate Accounting Summer 2004 Professor SP Kothari Sloan School of Management Massachusetts Institute of Technology July 7, 2004
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2 Tax and Timing Effects ± 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
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3 Deferred Tax Expense ± Is deferred tax expense a line item expense on the income statement? ± No ± If not where is it? ± It is a component of reported income tax expense ± What is the journal entry?
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lec17_taxes - Depreciation and Deferred Taxes 15.511...

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