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Hi Sir,
Just a quick question- I am preparing for the Feb 17 case study and have seen a comment on a blog about the film industry and how it depreciates its assets.
“It is generally accepted that a film company will either speed up the depreciation of the film to generate business losses and reduce tax liability, or slow the depreciation down by predicting long-lasting revenue from the movie, which increases the value of film as an asset on the books of the company.”
How can they speed up/ slow down the depreciation of a film? not sure I get this point
Hi,
Good to hear from you again.
They would adjust the depreciation through the use of the economic life. A long economic life would result in less depreciation each year, thus slowing the depreciation down. A shorter economic life would result in more depreciation each year, thus speeding up the depreciation.
Hope this helps and good luck with the exam.
Thanks
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