AICPA has a monthly publication called The Tax Adviser that reports and explains federal tax issues to tax practitioners. In the October 2013 issue they have an interesting case study on computing Earnings and Profit:
As part of the case study he details some import issues regarding depreciation:
To compute E&P, depreciation deductions generally must be determined under the alternative depreciation system (ADS). Under the ADS, depreciation calculations use a straight-line method and depreciable lives that are generally longer than the accelerated depreciable lives permitted for regular tax purposes. If corporations use the accelerated cost recovery system (ACRS) or the modified accelerated cost recovery system (MACRS) method in computing depreciation for regular taxable income purposes, Sec. 312(k) requires them to adjust E&P for the difference between the two methods.
The Earnings & Profits calculation does not use the standard tax method, convention and recovery periods stored in IRS and AMT schedules. In most fixed asset software this requires setting up a new schedule to maintain the E&P values. Bassets eDepreciation produces the E & P Report without the need of another schedule by using information contained in the IRS depreciation schedule to determine the correct E&P numbers based upon IRS regulations.
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More information about Bassets eDepreciation software can be found at Bassets.net. While there you can set up a demonstration, download a free evaluation copy and get a personalized pricing estimate.