Brandy Havens XXXXXXXXXX:41pm May 1 at 2:41pm ...

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Brandy Havens

XXXXXXXXXX:41pm May 1 at 2:41pm

Hi Marcus. You made a fantastic point about inventory and depreciation methods. We know that we have multiple methods available under U.S. GAAP. However, we would definitely want to be consistent with the methods used across all operating divisions.

Class, let’s look at an example together. We have Division A and Division B. Division A uses straight-line depreciation for their equipment with a five year useful life. Division B uses the double-declining balance method of depreciation for their equipment with a five year useful life. What sort of difference would this cause in year 1? How about year 3?

Nakul · Accepted Answer

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Straight line depreciation assumes fixed depreciation cost over the useful life of the asset while in double declining method of depreciation, the asset is depreciated more in the initial years as compared to the later years. It is easy to use straight line depreciation method but double declining depreciation method is more practical. Also both of the methods are used for different types of assets. For example, consider electronics which depreciate quickly than other type of assets,

Brandy Havens XXXXXXXXXX:41pm May 1 at 2:41pm Hi Marcus. You made a fantastic point about inventory and depreciation methods. We know that we have multiple methods available under U.S. GAAP. However,...

Brandy Havens

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