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Depreciation: GAAP vs tax methods

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What are some of the differences between depreciation methods allowed by the IRS and others permitted by GAAP? Why does the IRS have accelerated method of cost recovery for tax payers? Explain

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The 422 word solution explains the differences in depreciation methods between GAAP and tax with examples. It also includes explanations about why tax depreciation can be distortive to financial statements.

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What are some of the differences between depreciation methods allowed by the IRS and others permitted by GAAP?

The concept of depreciation is different between the IRS and GAAP. GAAP intends to follow the matching principle which would match the expense of plant, property and equipment over the expected useful life of assets purchased.

For example, a local delivery truck might only last three years because of heavy use, or because a company regularly replaces their trucks before the repairs outweigh the cost of new vehicles. For GAAP, the company should write off the trucks over 3 years which are their expected useful life. ...

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