Application of tax and accounting depreciation in investment project financial model

Financial model of an investment project involves the use of a variety of macroeconomic, industry and project-specific assumptions, and calculation of key ratios of investment attractiveness and debt service. One of specific issues from technical point of view is the choice between tax and accounting depreciation, as well as forecasting depreciation expense based on the requirements of tax legislation and the planned real use of fixed assets. The article considers the major possible differences between tax and accounting depreciation, the potential effects on the forecast indicators, and approaches to forecast deferred tax assets and liabilities based on these differences.