Consequences of authoritative depreciation rules on investment activities with special reference to the leasing sector

  • Project direction: Prof. Dr. Andreas Oestreicher
  • Team: Prof. Dr. Andreas Oestreicher, Lisa Hillmann
  • Duration: October 2015 – February 2016
  • Commissioned by: Federal Association of German Leasing Companies
  • Goal:
    The subject of this project was the extension, for a lessor’s tax purposes, of the depreciation period with respect to leasing property. This extension brings the depreciation period in line with the useful life of the asset. From this project, it emerged that taking a residual value into account when determining the depreciation amount, from the perspective of the statutory provisions relating to the tax balance sheet there is no reason for the tax authorities to disallow the common standard among leasing companies to base depreciation on the term of contract. Abandoning the common standard of depreciation based on contract term leads to a rise in the cost of capital, is detrimental to the neutrality of profit determination with respect to investments, and is associated with a significant decline in the potential for internal financing.