Final answer:
Tax depreciation can exceed book depreciation when the IRS-allowed depreciation methods accelerate deductions compared to the straight-line method used for financial reporting. This creates a timing difference that is reconciled over the asset's lifespan. To confirm if tax depreciation was higher, a review of the company's tax and financial records is required.
Step-by-step explanation:
To determine whether tax depreciation exceeded book depreciation, we need to understand the difference between these two concepts. Tax depreciation is the depreciation expense allowed by the Internal Revenue Service (IRS) for tax purposes. It typically follows the Modified Accelerated Cost Recovery System (MACRS), which allows for more significant depreciation deductions in the earlier years of an asset's life. On the other hand, book depreciation refers to the depreciation expense recorded on a company's financial statements and is based on the matching principle of accounting, which typically uses the straight-line method. This method spreads out the expense evenly over the useful life of the asset.
If a company's tax depreciation exceeds its book depreciation, it reflects a faster depreciation method used for tax purposes compared to accounting purposes. This situation can create a temporary timing difference on the company's financial statements, which is reconciled over the life of the asset. To know for certain whether tax depreciation exceeded book depreciation in a specific case, we would need to review that company's tax and accounting records for the relevant period.