ACTG 4710 Chapter Notes - Chapter 5: Speedstep, Capital Cost Allowance, Tax
1 Nov 2016
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Chapter 5: depreciable property & eligible capital property. Relevant area of ita: division b, subdivision b, sections 18-21. Accounting allows for professional judgment to determine amortization policies for particular asset. But ita restricts amortizing capital cost of depreciable property and intangibles based on asset class. Rates and methods of write-off of cost reflect economic policy incentives to invest in certain depreciable property. Underlying concept in determining assets cca rate = matching deduction to income earned from asset. The act disallows deduction of costs for capital expenditures. In computing business net income for tax, expense deductible only if it has helped earn income for that tax year. Capital property provides long-term benefit meaning that it allows the business to earn income over several periods and hence, true cost of generating revenues in one tax year is usually less than the actual cost of the property. Income tax rules regarding deduction of capital property are meant to enforce this matching principle.
