That was a question from the audience at the ASA/USC 13th Annual Fair Value Conference held May 10 in Los Angeles. “No, it does not apply to intangible assets,” said Milind Shah (KPMG), who co-presented a session with Will Frazier (Stout) on the Tax Cuts and Jobs Act. The new tax law’s provisions on immediate expensing and bonus depreciation have “not been talked about enough,” said Shah. Under the new law, businesses may take 100% bonus depreciation (immediate expensing) on qualified property both acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. Beginning in 2023, bonus depreciation is phased out by 20 percentage points each year, until it is fully eliminated in 2027.

What to do: Extend the DCF model to properly capture the impact of these changes on cash flow in annual projections as well as the terminal year. A separate analysis of the cash effects of the tax change can be done as a subset of the overall DCF analysis.