Why Don't All Companies Use the Same Depreciation Method

question 209

Multiple Choice

Why don't all companies use the same depreciation method?

• A)US income tax regulations require that a company use the same depreciation method for both financial reporting and income taxes.
• B)Different depreciation methods might better reflect the pattern in which assets' economic benefits are used.
• C)All companies do use the same depreciation method.
• D)Only large companies are allowed to use some of the more complicated depreciation methods.

---

Definitions:

Downstream Transfer

Transactions where a parent company sells or transfers assets to its subsidiary.

Straight-Line Method

An accounting method of depreciation where the value of a fixed asset is reduced uniformly over its useful life.

Consolidated Financial Statement

Financial statements that aggregate the financial position and operational results of a parent company and its subsidiaries.

Gross Profit

The financial result obtained after deducting the cost of goods sold from total sales revenue.