Question

The CFO of your company (total assets of $30 million) insists that all financial statements for his company will have no footnote for book/tax differences. Your company does issue financial statements prepared using GAAP standards. This year the company acquired a $2.5 million fleet of executive automobiles which will be assigned to each of the top 50 managers. The managers will be allowed to use the vehicles for business as well as personal purposes. At the end of three years, the automobiles will be sold and are expected to generate proceeds of $1,250,000. The CFO seeks your advice on the best way to keep a footnote off the financial statements.

1. Can we claim §179 or additional first-year depreciation?
2. What useful life should be assigned to the assets?
3. Should book and tax depreciation reflect a salvage value?
4. What other steps should be considered to meet the CFO’s objective?
5. Are these steps in the best interest of the company?

Answer 1

A) yes we can claim additional depreceation of the assets for first year, if the put to use for more than 180 days.

B) usefull life of the asset is determined verifying the nature of asset , quality of asset and usage of that asset in near future.

C) no , depreceation is calculated after deduction of salvage value.

D) notes to accounts are also part of financial statements. So CFO can mention these points in notes to accounts of the financial statements.

E) yes , all these steps are usfull for company development.