Immediate Expensing of Depreciation Has an Advantage for Profitable Firms

Immediate expensing of depreciation has an advantage for profitable firms in that it moves cash flows forward,thus increasing their present value.On the other hand,in the year that depreciation is immediately expensed the reported current year's profits are lower because of the higher depreciation expenses.However,the reported profits problem can be solved by using different depreciation methods for tax and stockholder reporting purposes.