Capital cost allowance (CCA) is the amount of amortization expense that the government will allow a company to deduct from its income for tax reporting purposes. The rules are clearly set by the Canada Revenue Agency (CRA) and must be strictly followed.
Capital cost allowance accounts for the cost of long-term assets that generate benefits for shareholders over a number of years. It establishes the amount that can be expensed each year for different types of assets.
For reporting to its business owners and financiers, the company does not have to use CCA. It has the discretion to choose from other methods like straight-line and/or declining balance to amortize its assets.