1. Gabriela H. Schneider, CMA; Grant MacEwan College
INTERMEDIATE ACCOUNTING Sixth Canadian Edition KIESO, WEYGANDT, WARFIELD, IRVINE, SILVESTER, YOUNG, WIECEK
Prepared by:
Gabriela H. Schneider, CMA; Grant MacEwan College 2

2. Amortization and Income Tax— The Capital Cost Allowance Method
C H A P T E R 12
Appendix 12A
Amortization and Income Tax—
The Capital Cost Allowance Method

3. Learning Objectives
Describe the income tax method of determining Capital Cost Allowance (CCA).

4. Capital Cost Allowance (CCA)
Amortization, depreciation and depletion are not tax deductible amounts
CCA is the tax equivalent of these
CCA may be used as a method of amortization, particularly by smaller companies
CCA follows same procedures as the declining balance method
Uses rates as prescribed by Canada Customs and Revenue Agency (CCRA)

5. Capital Cost Allowance (CCA)
Assets are grouped into classes
Each class has a CCA rate prescribed by CCRA
In the year of acquisition, the half-year rule applies
Half-rule rule applied to each class on net additions
CCA may be claimed below the assets residual or salvage value

6. Capital Cost Allowance (CCA)
When an asset is disposed of, the lower of its original cost or the proceeds from disposition are deducted from its CCA class
If no assets remain in a particular class:
any remaining undepreciated balance is deducted from taxable income (terminal loss)
If a credit (negative) balance results, that credit is added to taxable income (recapture of CCA)

7. COPYRIGHT
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