Microsoft KB Archive/82124

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Excel: DDB Results don't Match HP Calculator

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The information in this article applies to:


 * Microsoft Excel for Windows, version 3.0, 4.0, 5.0, 5.0c
 * Microsoft Excel for OS/2, version 3.0
 * Microsoft Excel for the Macintosh, version 3.0, 4.0, 5.0

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SUMMARY
The Excel DDB function returns a different answer than that returned by a financial calculator, such as the Hewlett-Packard (HP) 17C. Both answers are technically correct. The HP answers reflect a switch from the double-declining balance methodology to straight-line methodology in that period where it is to your financial advantage to do so. The DDB function does not make this change.

MORE INFORMATION
The DDB (double declining balance) function is used to calculate an accelerated depreciation (where the depreciation is highest in the first year and lower in later years) for an asset. Unlike the HP 17C, the DDB function does not take into account that it is often desirable to switch to the straight-line depreciation method at some point in the life of the asset. Microsoft Excel provides another function called VDB (variable declining balance) to provide this functionality.

Example
The following is a depreciation schedule using DDB, VDB and SLN (straight line) for an asset which costs $10,000, has a life of 5 years and a salvage value of $500.

     Year   DDB      VDB      SLN

1    4000     4000     1900       2     2400     2400     1900       3     1440     1440     1900       4      864      864     1900       5    518.4      796     1900

Total     9222.4     9500     9500

Note that the DDB and the VDB method diverge in the 5th year. This is the point at which it would be to your advantage to switch to SLN depreciation, as more depreciation is recognized earlier. The $276.60 of the asset not depreciated by DDB would have to be written off in the 6th year.

Additional query words: 3.0 3.00 4.0 4.00

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