Let's say my company purchases some tangible/fixed/long-term asset. Am I required to take a prorated depreciation expense each year for the life of the asset? Do I have the option to report the expense as a lump-sum/one-time expense on my income statement? Is it up to me to decide what I want my earnings to look like that year (i.e. lower if I take the one-time expense and higher using a depreciation expense)? Or is all of this somehow dependent on whether I am using GAAP?

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    Depends on the asset. What country, please? – Rocky May 30 '15 at 15:34
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    Is this a tax question? You didn't mention taxes, but I'm wondering if this is about taxes, and not strictly an accounting question. All tax questions require that a country be specified, because rules vary. – Chris W. Rea May 30 '15 at 17:24
  • I believe that when I last looked at this, n the US about two decades ago, some office equipment was considered expenses, some was considered depreciable assets, and some could be treated either way at the company's choice as long as they were consistent about it. The required time period over which the asset was deprecated also varied by kind of item . In other words there was no single answer; you had to read and understand the rules, or hire someone who had done so, to figure this out. Not what you want to hear, I'm sure. – keshlam May 30 '15 at 19:04
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    Yes, it's called "section 179" election in the U.S. on your tax return. Some assets can be expensed in the first year instead of depreciated over time. – Rocky May 30 '15 at 22:03
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    Thanks, all! I am interested in the US rules, and in particular those that pertain to public companies (those that listed on a major exchange). I'm not specifically interested in taxes, just trying to understand how to interpret what I see on the income statement. – SFun28 May 31 '15 at 13:34

For public US companies listed on an exchange, they must follow SEC guidelines. Thus, their financial statements will be prepared under US GAAP.

To answer your question, yes, if the cost is over their capitalization policy amount, it must be capitalized and depreciated.

Under GAAP there are several options for depreciation, such as straight line and unit-of-production. The choice is always disclosed in the footnotes of the 10-K. Ideally the company would choose a method that resembles the actual depreciation of the asset most closely so the statements are more reliable.

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