question archive A company is considering switching from accelerated to straight-line depreciation on its GAAP financial statements to reduce its depreciation expense and boost income
A company is considering switching from accelerated to straight-line depreciation on its GAAP financial statements to reduce its depreciation expense and boost income
Subject:FinancePrice: Bought3
A company is considering switching from accelerated to straight-line depreciation on its GAAP financial statements to reduce its depreciation expense and boost income.
a. What effect will this change have on the firm's reported income?
b. What is the financial value of this decision?
c. Suppose the company made the same switch on its tax returns. Now what is the financial value of this decision?
d. Given your answers to parts a-c, why do many companies make this change in choice of depreciation method?
