Question on Depreciation and Accumulated depreciation different, statements, difference, reading

mp3bu

What are the reasons for the depreciation in the Income statement (for say year 2007) to be different from the difference in the accumulated depreciation on balance sheets for the years 2007 and 2006?I thought we can calculate the depreciation to be charged in the Income statement by taking the cumulative depreciation difference for the two consecutive years.
Not sure if there are certain assets that are excluded in either statements.
(Refer to the Acme example in the cash flow reading in CFA curriculum)

EastCoastJ

Check for changes in the the DTA’s and DTL’s. Companies that use different depreciation methods for tax returns and financial statements will have DTA’s and DTL’s and different tax bases for fixed assets.
An example would be if a company reported depreciation expense on the income statement of $400 million, and the DTL related to depreciation increased from $350 million to $450 million (assume tax is 40%):
The additional depreciation expense for tax reporting equals change in the DTL divided by the tax rate. $450 million minus $350 million divided by 0.40 equals $250 million. Taxbasis depreciation would total $400 million plus $250 million, which is $650 million. The reporting difference in accumulated depreciation is approximately $1,125 million ($450 million divided by 0.40). The taxbasis for PP&E is $1,125 million less than the net amount reported on the balance sheet.

former

While I am not quite sure which example you are referring to, I’d expect them to have sold/acquired assets for a difference in yeartoyear balance sheet accumulated depreciation and the reported depreciation expense in the P&L to show.
I’d say that the P&L reports the actual depreciation expense for the period, while the accumulated depreciation on the balance sheet may be affected by any changes of depreciatiable assets. To see if this hypothesis is true you would check if there is any change in the value of these assets.
Taking the difference on the accumulated depreciation and taking that value as the depreciation amount to be charged is almost certainly misleading in any real scenario.
Hope this helps. If you cite the page number of the example we might answer in more detail.

dotamasta

Once instance could be that some Assets have been sold.
Accumulated depreciation for current year won’t include depreciation from sold assets but prior year statement would include it. So diff b/w accumulated dep could be different from depreciation expense.