Depreciation is the expense of a long-term asset posted each month into the general ledger by a company. Adjusted current earnings (ACE) depreciation is a technical calculation beginning around 1990 for certain transactions.

Facts

The Tax Reform Act of 1986 introduced companies to the alternative minimum tax. This ensures a company with copious amounts of income does not avoid its tax liability. ACE depreciation is a technical recalculation to adjust earnings for calculating the alternative minimum taxable income.

Features

Depreciation for tax purposes follows the modified accelerated cost recovery system (MACRS). This advances the depreciation benefits for assets when paying taxes.

Considerations

Companies with ACE depreciation adjustments for the alternative minimum tax can use the alternative depreciation system allowed by tax law. This typically mirrors asset class life better and can help companies estimate ACE depreciation adjustments.