Asset write-up / write-down
Let's suppose a Company has $100 in its PP&E and a 50% tax rate.
Case 1 - After valuing its PP&E fair price comes to the conclusion that it should write-down $50. As I understand this $50 will reduce EBT (non-operating expense) by $50 and net income by $25. Cash goes up by $25, PP&E goes down by $50 and retained earnings goes down by $25 and it balances.
Case 2 - Write-up of $50. Is it the opposite of case 1? It seems strange that the company is paying more tax just because they revalued its fixed assets?
Does anyone could confirm case 1 and help me on case 2?
If I'm not mistake, one is not allowed to write-up a long-lived asset under US GAAP. However, you can under IFRS and it runs through OCI. So, yes, it would likely just be the reverse of case 1.
Autem quod repudiandae quia rem praesentium. Dignissimos eos veritatis fuga consequatur.
Et qui quae in et sint. Laudantium voluptas dolorum voluptas dolores et ut. Quis ut qui omnis ea fugit nemo ratione.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...