A company that wants a CPA to review its financial statements must depreciate its assets under which accounting principles for its tax return?

The correct answer, which is TAX RULES, highlights that for tax purposes, businesses must adhere to the specific regulations set forth by the IRS, or other relevant tax authorities, regarding the depreciation of assets. These rules often differ from Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), which focus on how financial statements are prepared and presented to stakeholders.

Under TAX RULES, businesses typically follow specific methods for calculating depreciation, such as the Modified Accelerated Cost Recovery System (MACRS) in the United States. This system allows for accelerated depreciation compared to more traditional methods that might be used under GAAP or IFRS.

When a company prepares its tax return, compliance with these tax rules is paramount to ensure that they report their taxable income accurately while maximizing allowable deductions related to depreciation. This distinction is crucial since the financial reporting framework (GAAP or IFRS) primarily serves external users and investors, whereas tax rules are specifically designed for tax reporting and liabilities.