Project Management

Capital Cost Depreciation: Agile Wins Over Waterfall

PMI Durham Highlands Chapter

Kevin Aguanno is the agile practice lead for Procept Associates Ltd., one of PMI’s first Registered Education Providers, specializing in training and project and programme strategy consulting. Author of over 30 books, audiobooks and DVDs on project management topics, he teaches agile methods at several universities and at conferences around the world. He spends most of his time helping large, complex organizations integrate agile project management methods into their governance frameworks.

A client contacted me recently with an interesting question. The client heads the PMO in a national branch of a multi-national corporation. His group was starting the deployment of agile project delivery methods within the organization and received an interesting query from his finance department. In analyzing the business case justification for incorporating an agile option within their project lifecycle model, the finance team asked the question, “Does the switch to agile change how (or if) we can depreciate our project capital costs?”

At first, the answer seemed simple but, upon further analysis, the situation is a bit more complicated. After contacting my own accountant and then both the United States’ Internal Revenue Service and the Canada Revenue Agency, I was able to respond to my client’s question.

Basic Principles
Before I share the results of my research, let me provide a few basic taxation principles for those who need a refresher. When a business incurs expenses in order to earn income, tax laws generally allow the business to deduct those expenses from any income earned, reducing the amount of income that is subject to taxation. The categories of expenses that are eligible for deduction and the portion of the expenses that can be deducted vary from country to country, but the principal generally holds true. (Yes, I know there are a …

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