Accelerated depreciation method - depreciate the asset fast in earlier usage period of asset and slower

in later stages. Multiplying by 2 because with DDB we want to depreciate the asset fast - an accelerated
declining depreciation.

Basically DDB says: when does an asset, say a car losses its economic value? The answer is, when it goes
from new(when bought) to old(used). When an asset transits from new to old/used, it suddenly losses a
lot of its economic value, but in the later stages, as the time passes by, its resale value stabilizes as the
amount by which the asset depreciates is significantly reduced in later stages of the asset’s life. In other
words DDB says: “depreciate the asset fast”. You can see that DDB is a very realistic approach to the
asset depreciation, in line with the practical financial market.

DDB- assets loose its resale a lot quicker than other methods are giving it credit for, assets loose its
resale a lot quicker in early years than later years as compared to other methods. It is by far the most
aggressive method, it says lets depriciate the asset quick in early stages...and look at the first two years
as compared to other methods, just way too high and then less depreciation/more stable depreciation
in the later stages.

U.P. makes intuitive sense but as a practising accountant not much liked because most assets won’t
work for U.P, assets like cars may but not many most other assets, like chairs, with chairs would you
depreciate it by measuring how many times my but sit on it, what if I gain weight, so it doesn't make
much sense. And its the same with most number of other assets when I look around.

Most companies use S-L. It is #1 in popularity because the estimates are pretty simple and straight
forward, easy to calculate, and less time consuming. Say a car company had 100 same cars at different
stations/showrooms, now with U.P. would they get their 100 employees to check odometers of the cars
to see their mileage for this year? The company would need to keep track of mileage of each car
separately, each car gets a separate depreciation entry, even though they are all the same cars. OR the
accountant could say, all of our cars are a year old now, they all depreciate $4000 for this year end. So
with S-L the depreciation entry takes 5 seconds or hours of hours of coordination with U.P, and for what
benefit, just for an estimate (these all are estimates). Even if U.P is a marginally better estimate, it costs
company a lot just for a marginally better estimate. U.P is very much practically inconvinient.

Many governments (like canada and usa) regulate ddb because it is harder to manipulate, say if a
company's expenses are higher, then profits will be lower, hence taxes will be lower. In turn, cutting
government out as much as possible. One way to do this would be with S-L to make life of asset shorter,
so diving by 4 instead of say 5 my depreciation exp gets higher, meaning shorter life of the assest, higher
expenses, lower profits, thus paying government less. Goverments do not like this, as they know
companies will manipulate residual values, the useful life of the asset. Change those numbers and you
change your taxes too - the government hates that.

so the govt says you bought a car congratulations, now take 30% depreciation exp rate for car, you
bought equipment take 20%, you bought a building take 4%. Now looking at the table, you can not
manipulate beginning asset value (because that’s what you paid for the asset and the government
knows it), you can not manipulate #of months as government knows the dates, and as for the
depreciation rate they tell you that. So they are pretty much in control of everything and hence most
govts require companies to use some form of DDB for their assets. Examples: CCA is Canadian govt
regulated DDB, whereas MACRS is USA govt regulated DDB.

But still most companies use S-L. It is #1 in popularity because the estimates are pretty simple and
straight forward, easy to calculate, and less time consuming. Also because they can use this method to
their benefit. #2 in popularity and use is DDB, not much appreciated by the companies because of its
controlling nature, but still liked and used by companies due to its realistic and practical approach. It is
not a time consuming and practically inefficient approach like U.P. but it’s still complicated than the
most used approach S-L, but even then it is very much liked and used due to its realistic and practical
approach that it provides/imposes. Whereas, U.P is just practically in efficient.