The Benefits Of Cost Segregation - 997 Words

Advantages of Cost Segregation Cost segregation is the process of grouping or classifying assets into different categories for the purpose of calculating depreciation values, in a way that can be beneficial for the business, to an extent that can be allowed. It is a legitimate tax saving strategy that is often overlooked due to the complexity and lack of proper guidelines in the past. However, in 1997, the court ruling in the case of Hospital Corporation of America (109 TC 21) has set a precedent for many tax payers to pursue cost segregation. The key benefits of cost segregation are increased cash inflow, bonus depreciation, write-off provisions, and property tax savings. Background Assets such as land, factory, and machinery used in production are some of the most significant investments for businesses. Businesses must capitalize these long term assets and can allocate the costs over the useful life of the assets as they are subject to obsolescence, wear and tear. Before 1981, both tax and financial accounting calculations for depreciation were similar; tax payers choose one of the various methods available. In 1981, tax and financial accounting depreciation methods parted ways when Congress introduced the Accelerated Cost Recovery System (ACRS) for computing depreciation expense. 1 This later paved way for the MACRS – Modified Accelerated Cost Recovery System, which is widely used even today. The method, recovery, period and convention of MACRS vary based on whetherShow MoreRelatedRacial Issues and Segregation in Schools Today724 Words   |  3 Pagescan be answered by, â€Å"I attend a Black school.† Schools are still segregated today, over a century after slavery ended, about 60 years after segregation was illegal. It takes time to adapt to such dramatic changes like being forced to integrate, but the fact of the matter is, school segregation is still an issue today. Having our children exposed to segregation from such a young age is a problem. 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According to FASB Statement of Concepts No. 6, paragraph 25, assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. They represent probable future economic benefits controlled by the enterprise. According to FASB Statement of Concepts No 6, paragraph 80, expenses are outflows or other using up of assets or incurrencesRead MoreKoss Case Essay examples640 Words   |  3 Pagessimilar fates. Although there are situations where the cost would outweigh the benefit, I think it is still important for internal controls to be tested. There could be a provision for these smaller companies to have a smaller scale attestation of internal control effectiveness if they show that the costs outweigh the benefits. 5.) 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