A recent annual report of H. J. Heinz Company includes the following note:Depreciation: For financial reporting purposes, depreciation is provided on the straight-linemethod over the estimated useful lives of the assets, which generally have the following ranges:buildings—40 years or less; machinery and equipment—15 years or less; computer software— 3–7 years; and lease hold improvements—over the life of the lease, not to exceed 15 years. Accel-erated depreciation methods are generally used for income tax purposes. a. Is the company violating the accounting principle of consistency by using different deprecia-tion methods in its financial statements than in its income tax returns? Explain. b. Why do you think that the company uses accelerated depreciation methods in its income taxreturns?c. Would the use of accelerated depreciation in the financial statements be more conservative orless conservative than the current practice of using the straight-line method? Explain.
A recent annual report of H. J. Heinz Company includes the following note:
method over the estimated useful lives of the assets, which generally have the following ranges:
buildings—40 years or less; machinery and equipment—15 years or less; computer software—
3–7 years; and lease hold improvements—over the life of the lease, not to exceed 15 years. Accel-
erated depreciation methods are generally used for income tax purposes.
a. Is the company violating the accounting principle of consistency by using different deprecia-
tion methods in its financial statements than in its income tax returns? Explain.
b. Why do you think that the company uses accelerated depreciation methods in its income tax
returns?
c. Would the use of accelerated depreciation in the financial statements be more conservative or
less conservative than the current practice of using the straight-line method? Explain.
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