Register now or log in to join your professional community.
There'll be a mismatch between the depreciation recognition in Company's P&L against the appropriate reporting period. You're using the asset but not recognizing the cost of the economic benefits (production, operations) you are receiving from it.
Technical wise, not recognizing the depreciation will retain the original acquisition cost of the asset. At the time of asset disposal, it'll have a one-time financial impact.
Not booking the depreciation in its proper periods will:
- Understate your expenses and overstate your income which will lead to paying more taxes.
- Affect the financial ratios related to fixed assets and subsequently affecting the management's decisions based on those ratios.
