Question
My accountant calculates two different depreciation figures. Why are they different and which one do I use?
Answer
The Companies Act 2013 (Schedule II) computes depreciation over the useful life of each asset, while the Income Tax Act 1961 uses fixed percentage rates on the written-down value of blocks of assets. You use the Companies Act figure in your audited financial statements and the Income Tax figure to compute taxable income. Because the methods differ, the same asset produces different yearly depreciation, creating a timing difference recorded as deferred tax. Tax rates are often front-loaded. Compute either basis with our depreciation calculator.
This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.