Why is the modified accelerated cost recovery system not generally accepted for financial accounting purposes?

Expert Solution

Step 1: Definition of MACRS

MACRS stands for the Modified accelerated cost recovery system. It is a system used in the United States for tax depreciation. In this, the capitalized cost is recovered during the life of the intangible asset.

Step 2: Explanation of why MACRS is not acceptable

MACRS is a system that gives the right to some assets using the straight-line method of depreciation but most of the assets accelerated depreciation method is used. One of the main reasons for not accepting MACRS in financial reporting is the wrong estimation of the value and the wrong period used for calculating depreciation.

It is not acceptable in financial reporting because the period of allotting the cost to the asset is less than the life on the asset due to this wrong salvage value estimated.

Sahil Dangi answered 1 year ago

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