The Double-Declining Balance (DDB) depreciation method is one of two common methods businesses use to account for the expense of long-lived assets. Also known as the reducing balance method, DDB accelerates depreciation expense in the early years of an asset's life and results in a larger depreciation expense in the early years compared to the straight-line method.One advantage of using the double-declining balance method is that it provides a greater tax deduction in the early years of an asset's life. This can be beneficial if a business is in a high tax bracket and is looking to reduce its tax liability.Another advantage of the double-declining balance method is that it more accurately reflects the pattern of an asset's usage. Since depreciation expense is higher in the early years, it more closely matches the pattern of an asset's usage, which is typically highest in the early years of an asset's life.The double-declining balance method is not without its disadvantages, however. One downside is that it can result in a larger depreciation expense in the early years, which can be a disadvantage if a business is trying to keep expenses low.Another downside of the double-declining balance method is that it can result in a higher tax liability in the early years. This is because the larger depreciation expense in the early years results in a higher tax deduction, which can increase a business's tax liability.Overall, the double-declining balance method is a popular depreciation method because it offers a number of advantages, including a greater tax deduction in the early years and a more accurate reflection of an asset's usage. However, it is important to be aware of the potential disadvantages associated with this method so that businesses can make informed decisions about which depreciation method is best suited for their needs.
