Deferred Depreciation
Reporting and tax regulations may require you to account for temporary differences in expenses between the corporate book and the tax book. This temporary difference in depreciation expense is called deferred depreciation.
Deferred depreciation occurs when you use different depreciation methods in the corporate and tax books. The depreciation calculation reduces, and eventually eliminates, the temporary difference as the asset becomes fully reserved.
For example:
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In the corporate book, you depreciate assets using a straight-line method.
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In the tax book, you use an accelerated depreciation method to take more depreciation in the early years of an asset's life and less in the later years. The higher depreciation expense in the early years reduces your taxes at that time. Reporting and tax regulations require that you create a liability on your balance sheet to account for the tax payment delay.
In Oracle Assets you can:
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Calculate deferred depreciation and create deferred depreciation journal entries for your general ledger.
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Project depreciation expense and use those values to determine future income tax liability.
When calculating deferred depreciation, remember the following points:
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The tax book and associated corporate book must use the same number of periods per fiscal year.
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The general ledger period in which you want to create journal entries must be open.