The double declining balance (DDB) method is accelerated depreciation: it charges the most expense in an asset’s early years and progressively less later. The logic — many assets genuinely lose most of their value (and usefulness) early, and DDB matches the books to that reality.
The formula
Annual depreciation = 2 × (1 ÷ Useful life) × Book value at start of year
Two things to notice: the rate is double the straight-line rate (hence the name), and it applies to the declining book value, not the original cost — which is what makes each year’s charge smaller than the last. Salvage value is not in the formula; it acts only as a floor the book value may not cross.
Full worked example
Machine cost $100,000, useful life 5 years, salvage value $10,000. Straight-line rate 20%, so DDB rate 40%:
| Year | Opening book value | Depreciation (40%) | Closing book value |
|---|---|---|---|
| 1 | $100,000 | $40,000 | $60,000 |
| 2 | $60,000 | $24,000 | $36,000 |
| 3 | $36,000 | $14,400 | $21,600 |
| 4 | $21,600 | $8,640 | $12,960 |
| 5 | $12,960 | $2,960* | $10,000 |
*Year 5 is capped: 40% would be $5,184, but that would breach the $10,000 salvage floor, so the charge is trimmed to land exactly on it. In practice many companies also switch to straight-line in the year straight-line on the remaining balance gives a larger charge — a standard refinement.
When DDB makes sense — and when it does not
Use it for assets that fade fast: vehicles, computers, tech equipment. Skip it for assets that serve evenly, like buildings. Strategically, DDB depresses early profit but shelters early cash (bigger tax deductions sooner) — a trade-off between reported earnings and cash flow. The accumulated result of all this lands in one balance-sheet line, unpacked in Is Accumulated Depreciation an Asset? (Contra-Asset, Explained); the spending it depreciates is Capital Expenditures (CapEx).
Why is it called double declining?
The rate is double the straight-line rate, applied to a declining book value — 40% instead of 20% for a 5-year asset.
Does salvage value appear in the DDB formula?
No — unlike straight-line, DDB ignores salvage in the calculation and uses it only as a floor that book value cannot fall below.
Can you switch from DDB to straight-line?
Yes, and it is standard practice: switch in the year straight-line on the remaining balance produces a larger deduction.
Is DDB allowed for tax purposes?
In the US, tax depreciation follows MACRS, which itself uses declining-balance mechanics for most asset classes — so the concept carries over, with prescribed rates and lives.