The double-declining balance method is the most commonly used version of the declining-balance method of depreciation, applying exactly twice the straight-line depreciation rate to an asset's declining book value each year. Because the rate is applied to a shrinking base rather than to the asset's original cost, this accelerated method produces much larger depreciation expense in an asset's early years and progressively smaller amounts in later years.
How the double-declining rate is determined
The starting point is the straight-line rate, found by dividing 100% by the asset's useful life in years — an asset with a 5-year useful life has a straight-line rate of 20% per year. The double-declining rate simply doubles that figure, to 40% in this example, and that fixed 40% rate is then applied to the asset's beginning-of-year book value every year, rather than to its original cost.
A simple worked example
Equipment costing $100,000 with a 5-year useful life and a $10,000 salvage value has a straight-line rate of 20%, doubled to 40% under this method. Year one depreciation is 40% of the full $100,000 cost, or $40,000, leaving a $60,000 book value. Year two depreciation is 40% of that $60,000, or $24,000, leaving $36,000. This pattern continues, with each year's depreciation smaller than the last, until book value approaches the $10,000 salvage floor, at which point depreciation stops entirely rather than reducing book value below that estimated salvage amount.
Why salvage value is handled differently under this method
Unlike straight-line depreciation, the double-declining balance calculation does not subtract salvage value before applying the percentage rate each year; instead, salvage value only comes into play as a floor that stops the calculation once it is reached, which is why the final year of an asset's life under this method sometimes requires a manual adjustment to bring book value down to exactly the salvage amount rather than letting the formula run past it.
Why businesses choose double-declining balance over straight-line
Double-declining balance is often used for income tax purposes because front-loading depreciation into an asset's earlier years defers tax payments to later years, improving near-term cash flow, even though total depreciation over the asset's full life is identical to what straight-line would eventually produce. Some companies also use it for financial reporting on assets that genuinely lose usefulness and economic value more quickly in their early years, such as technology equipment that becomes outdated rapidly even while still fully functional, making the accelerated expense pattern a more faithful reflection of how the asset's value is actually being consumed.
Why the method is also called 200% declining balance
The double-declining balance method is sometimes called the 200% declining balance method, referring directly to the fact that it doubles, or applies 200% of, the straight-line rate. A related but less aggressive variant, the 150% declining balance method, applies only 1.5 times the straight-line rate instead, producing a less extreme front-loading of depreciation expense while still accelerating it relative to straight-line. Tax software and depreciation schedules commonly default to this method, or one of the other Modified Accelerated Cost Recovery System categories built on similar logic, for most types of business equipment eligible for accelerated tax depreciation in the United States.