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So does this mean we can depreciate things like 3-year AWS reserved instance costs, as they are now counted as assets? Seems pretty nice to me.
by binarymax 9y ago
So does this mean we can depreciate things like 3-year AWS reserved instance costs, as they are now counted as assets? Seems pretty nice to me.
- scott00 9y agoSwitching from expensing a reserved instance cost to capitalizing and then depreciating it is actually a bad thing. It increases your short term paper profits and decreases your long term paper profits, but doesn't change your pre-tax cash flow. Since you pay taxes on paper profits, it increases short term taxes and decreases long-term taxes, reducing after-tax cash flow in the short term and increasing it in the long term. Since money has time value this reduces the value of your business. In general, if you have the option for tax purposes, it's better to expense something than capitalize and then depreciate it.