Double-Declining Balance (DDB) Depreciation Method

The double-declining balance (DDB) method is an accelerated depreciation technique that allocates larger expense amounts to the early years of an asset’s useful life and smaller amounts later. It applies a constant rate — twice the straight-line rate — to the declining book value each period. Companies use DDB for assets that lose value quickly or become obsolete soon after purchase.

Key points

• DDB is an accelerated, reducing-balance method that uses a depreciation rate equal to 2 × the straight-line rate.
• It produces higher depreciation expenses in early years and lower expenses later.
• You must ensure book value never falls below the estimated salvage value; the final period’s depreciation may be adjusted to reach salvage.

Formula

Depreciation (period) = 2 × (Straight-line depreciation rate) × Beginning book value

Where:
* Straight-line depreciation rate = 1 / Useful life (in years)
* Beginning book value = asset cost less accumulated depreciation at the start of the period

How DDB works

1. Calculate the straight-line rate: 1 / useful life.
2. Double that rate to get the DDB rate.
3. Multiply the DDB rate by the beginning book value each period to compute depreciation.
4. Subtract depreciation from book value to get the ending book value for the period.
5. Repeat each period, applying the same DDB rate to the new (reduced) book value.
6. If applying the DDB rate would reduce book value below salvage, adjust the final depreciation so ending book value equals the salvage value.

This method follows the matching principle: costs are spread over periods when the asset helps generate revenue.

Example

A company buys a delivery truck for $30,000 with a 10-year useful life and a salvage value of $3,000.

1. Straight-line rate = 1 / 10 = 10%
2. DDB rate = 2 × 10% = 20%

Year-by-year (rounded to cents):
* Year 1 — Beg BV $30,000.00; Depreciation = $6,000.00; End BV = $24,000.00
Year 2 — Beg BV $24,000.00; Depreciation = $4,800.00; End BV = $19,200.00
Year 3 — Beg BV $19,200.00; Depreciation = $3,840.00; End BV = $15,360.00
Year 4 — Beg BV $15,360.00; Depreciation = $3,072.00; End BV = $12,288.00
Year 5 — Beg BV $12,288.00; Depreciation = $2,457.60; End BV = $9,830.40
Year 6 — Beg BV $9,830.40; Depreciation = $1,966.08; End BV = $7,864.32
Year 7 — Beg BV $7,864.32; Depreciation = $1,572.86; End BV = $6,291.46
Year 8 — Beg BV $6,291.46; Depreciation = $1,258.29; End BV = $5,033.16
Year 9 — Beg BV $5,033.16; Depreciation = $1,006.63; End BV = $4,026.53
* Year 10 — Beg BV $4,026.53; Depreciation adjusted to reach salvage = $1,026.53; End BV = $3,000.00

Total depreciation over 10 years = $27,000 (cost minus salvage).

When to use DDB

• Assets that provide greater economic benefit early in their life (e.g., certain machinery, delivery vehicles).
• Assets likely to become obsolete quickly (e.g., some technology equipment).

Pros and cons

Pros:
* Matches higher early expenses with higher early benefits.
* Can provide tax deferral advantages (higher early-year expenses reduce taxable income sooner).

Cons:
* Lower depreciation charge later may understate expense relative to usage.
* More complex tracking and possible need to switch or adjust in final years to reach salvage.

Bottom line

The double-declining balance method accelerates depreciation by applying twice the straight-line rate to a decreasing book value. It is useful when an asset loses value rapidly or becomes obsolete early. Always ensure the book value does not fall below the salvage value and adjust the final period’s depreciation as needed.