Double declining balance, or DDB, is an accelerated depreciation method that records more expense in an asset's early years and less later. Double the straight line rate and apply it to beginning book value each year. Do not subtract residual value from cost before the first DDB calculation, but never depreciate the asset below residual value.
Double declining rate = 2 × (1 ÷ useful life)
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DDB depreciation expense = beginning book value × double declining rate
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Allowed depreciation = the lesser of calculated DDB expense or (beginning book value − residual value)
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Useful life establishes the rate. A five-year life has a 20% straight line rate, so DDB uses 40%. The rate stays at 40%; the dollar expense declines because beginning book value becomes smaller each year.
Beginning book value is cost in year one and prior ending book value after that. Using original cost every year would create equal expense, which defeats the declining-balance design.
Residual value acts as a floor. Unlike straight line, DDB normally does not subtract residual value when establishing the first-year calculation base. Instead, compare the calculated expense with the amount still depreciable and reduce the final charge when necessary.
Capitalized cost follows the same acquisition-cost rules as other depreciation methods. The depreciation method changes the timing of expense, not which expenditures belong in the asset.
A print shop acquires a finishing machine with capitalized cost of $58,700. It expects a five-year useful life and $4,700 residual value. The straight line rate is 20%, so the double declining rate is 40%.
Year one expense is 40% of $58,700, or $23,480. Ending book value is $35,220. Year two applies the same 40% rate to $35,220, not to original cost, producing $14,088. Continue with the new beginning book value each year.
| Year | Beginning book value | Rate | Depreciation expense | Ending book value |
|---|---|---|---|---|
| 1 | $58,700.00 | 40% | $23,480.00 | $35,220.00 |
| 2 | $35,220.00 | 40% | $14,088.00 | $21,132.00 |
| 3 | $21,132.00 | 40% | $8,452.80 | $12,679.20 |
| 4 | $12,679.20 | 40% | $5,071.68 | $7,607.52 |
| 5 | $7,607.52 | Capped | $2,907.52 | $4,700.00 |
| Total | $54,000.00 |
The schedule recognizes total depreciation of $54,000, equal to $58,700 cost less $4,700 residual value. It does not recognize the same expense each year: $23,480 in year one is more than eight times the capped $2,907.52 final-year charge.
Forty percent of the year-five beginning book value, $7,607.52, is $3,043.008. Recording that amount would leave $4,564.512, below the $4,700 residual value. The maximum remaining depreciation is therefore $2,907.52, calculated as $7,607.52 less $4,700.
This cap is not an optional rounding fix. Residual value limits the total depreciable amount when the estimate has not changed. Before recording every late-year DDB amount, compare the formula result with beginning book value minus residual value.
Some accounting policies switch from declining balance to straight line when straight line over the remaining life produces a greater expense and better reflects the consumption pattern. U.S. tax MACRS explicitly includes prescribed declining-balance methods and a switch to straight line when it yields an equal or greater deduction. A tax MACRS schedule also uses statutory recovery periods and conventions, so it should not be replaced with this simple book DDB schedule.
For the same $58,700 cost, $4,700 residual value, and five-year life, straight line expense would be $10,800 each full year. DDB records $23,480 in year one, $14,088 in year two, and then progressively less. Both methods recognize the same $54,000 total if estimates remain unchanged and the asset reaches the end of its useful life. They differ in timing.
That timing affects reported profit and book value. DDB produces lower early profit and lower early book value than straight line because it recognizes more depreciation sooner. Later, DDB expense falls below straight line expense. Depreciation does not change the asset's cash purchase price, and the method by itself does not change total lifetime expense.
An accelerated method can fit an asset that provides more economic benefit, loses productive capacity, or becomes obsolete more rapidly in early years. Computers, vehicles, and certain equipment are common examples, but the expected consumption pattern must support the method.
IAS 16 requires the depreciation method to reflect the pattern in which the asset's future economic benefits are expected to be consumed and requires review of the method at least at each financial year-end. A faster tax deduction is not enough by itself to justify accelerated book depreciation. Book reporting and tax reporting answer different questions and can use different schedules.
A classroom problem may prorate the first year's DDB expense for the time the asset is available for use. If the $58,700 machine is available for nine months and the problem specifies monthly proration, full-year DDB of $23,480 is multiplied by 9/12, giving $17,610. Ending first-year book value is $41,090.
Then apply the 40% rate to the next period's required beginning book value according to the stated convention. Do not assume a monthly convention for tax. IRS MACRS uses prescribed conventions such as half-year, mid-quarter, or mid-month depending on the property and facts.
Subtracting residual value before applying DDB. That is the straight line setup. For DDB, start with book value and use residual value as the floor.
Applying 40% to original cost every year. The rate is constant, but the base declines. Use beginning book value.
Stopping after multiplying. In later years, test whether the calculated expense would push book value below residual value.
Calling DDB the tax deduction. U.S. tax MACRS has related concepts but adds recovery classes, conventions, tables, and switching rules.
Assuming accelerated means more total expense. DDB moves expense earlier. With unchanged estimates, total depreciation remains cost less residual value.
Confusing book value with market value. DDB carrying amount is an accounting allocation, not an appraisal of the asset's current selling price.
Double the straight line rate, apply it to beginning book value, and cap the late-year expense so ending book value never falls below residual value. DDB accelerates timing, not total lifetime depreciation.
Multiply beginning book value by twice the straight line rate. The rate is 2 divided by useful life, subject to a cap that prevents book value from falling below residual value.
Do not subtract salvage value from cost before the first DDB calculation. Use it as a floor and reduce a late-year expense if the normal formula would push book value below it.
It applies twice the straight line rate to a declining book value, producing larger depreciation charges in early years and smaller charges later.
No. If estimates do not change and the asset is fully depreciated, both methods recognize cost less residual value. DDB recognizes more of that total earlier.
DDB can fit an asset whose benefits or productive capacity are consumed more heavily in early years. The method should reflect the expected consumption pattern.
No. MACRS uses declining-balance concepts for some U.S. tax property but also requires statutory recovery periods, conventions, tables, and a switch to straight line.
By the FinanceBrain Team · Last verified July 12, 2026 · How we produce and verify articles