Depreciation of Property

Depreciation of Property: An Accounting Perspective

Standards for the depreciation of property are included in a body of strictly held financial accounting practices established and amended by organized groups of accounting professionals and governed by federal statutes. The Financial Accounting Foundation, an independent 501(c)(3) foundation, was founded in 1972 by professional accounting associations that represent certified public accountants and the accounting profession in general. The Financial Accounting Foundation administers and oversees two private not-for-profit organizations, the Financial Accounting Standards Board (FASB), which was created in 1973, and the Government Accounting Standards Board (GASB), which was created in 1984. Both organizations are responsible for maintaining and updating the Generally Accepted Accounting Principles (GAAP) for their respective sectors. FASB maintains the GAAP standards for private sector business enterprises and not-for-profit organizations, while GASB maintains GAAP standards for state and local governments. Each organization issues advisory bulletins with statements of accounting rules, commonly referred to as pronouncements, which represent new accounting standards as well as amendments and restatements of existing accounting standards. Federal statutes, rules, and regulations governing the treatment of income and financial reporting for federal income tax purposes are promulgated by the U.S. Department of the Treasury under the Internal Revenue Code and administered by the Internal Revenue Service (IRS). The reporting of depreciation of residential income-producing or rental property on audited financial statements is prepared in accordance with GAAP standards established by FASB. The regulatory requirements for income tax deductions for depreciation of property are set forth in IRS bulletins and must be filed on the appropriate IRS forms for the applicable tax year.

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