GAAP determines the depreciation method used for financial reporting purposes and tax purposes.

Question

Quizplus · Accepted Answer

GAAP and tax regulations have different guidelines for depreciation methods. GAAP focuses on matching expenses with revenues over the useful life of an asset, while tax regulations allow for more accelerated depreciation methods to help businesses save on taxes. Therefore, businesses may use different depreciation methods for financial reporting and tax purposes.

GAAP Determines the Depreciation Method Used for Financial Reporting Purposes