Abstract
This paper reports an extension of previous research into the effects of cyclical asset expenditures on deferral of income taxes associated with the use of accelerated depreciation.' The extension consists of (a) consideration of nonlinear, as well as linear trends in asset expenditures over time, (b) development of an improved simulation model, and (c) use of data from Price Waterhouse clients consisting of major manufacturing companies, all members of the Fortune 500 list. The questions pertaining to tax allocation are among the main accounting controversies of recent years. In particular, discussion has been concentrated on the effects of using straight line (SL) depreciation for reporting purposes and accelerated depreciation for tax purposes. The principal issue in this situation is the extent to which taxes are permanently or temporarily deferred.
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