Disadvantages of Double Declining Balance Method





The disadvantage of using the double-declining depreciation method is that it causes net income to fluctuate from year to year, with a lower net income in the first years of using the depreciation method. Investors look at a company's net income when considering investment options, so a low net income amount is not beneficial for companies needing investors. Again, this is why some companies use double-declining balance depreciation method for tax purposes only. The rules surrounding the double-declining depreciation method are a little more complicated than the straight-line method, and this is a disadvantage for some companies.

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Accounting for Management - Accounting theme from Business Law.