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Why reducing balance is less effective?
12-18-2006, 06:13 AM
Post: #1
Why reducing balance is less effective?
I have a question guys, i have been cracking my head all day. The question is, why is reducing balance depreciation effective on a large piece of equipment???

Would appreciate some feedback.
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12-18-2006, 09:15 PM
Post: #2
 
International accounting standards do not prefer any method of depreciation i.e. reducing balance or straight line..
IAS gives management to opt for the method that best depicts the realization of economic benefit from an asset...
Normally in industries, the efficiency of machinery is good when it is new and output tends to fall as the machine gets older. So an entity can choose the reducing balance for a plant of such kind. But other assets like vehicle or building give the same benefit over its useful life...
So no method is encouraged or discouraged but opted on the basis of realization of economic benefits...
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12-19-2006, 01:38 AM
Post: #3
 
Azmol to the extent I can understand your question is not making sense. The effectiveness of reducing balance method or otherwise on large equipment, I have never heard of such thing. A self made explanation like the one given can be the only answer. IAS does not prefer any method, however, reducing balance is the more used one. And, it makes some sense (I hope you can understand), but never heard of anything you mentioned.
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03-27-2009, 11:58 PM
Post: #4
 
Hi Ali,

I've been looking for you.

So I hope to see you in UAE. Please, if you certainly want, write me back to my e-mail address, how we can get in contact there in May.

I have no UAE driving license, but will have a driver and car so hope to be relatively easy to move around.

Best regards

Orlin
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