Companies in many countries pay taxes on profits: revenues minus expenses.
There are various types of expenses, including salaries paid to workers, cost of inputs, and amortization (tax law) and depreciation.
The applicable recovery period determines the number of years over which the property should be depreciated.
Governments generally provide opportunities to defer taxes where there are specific policy reasons to encourage an industry.
For example, accelerated depreciation is used in some countries to encourage investment in renewable energy.
Under accelerated depreciation, the company may be allowed to allocate $200 of the cost of the generator for five years.
It does not factor in an accurate class life, recovery period or account for convention.)