Financial Glossary
Double Declining Balance Depreciation
Double declining balance depreciation is an accelerated depreciation method that recognizes larger expense amounts in the early years of an asset's life and smaller amounts later. It applies double the straight-line rate to the asset's remaining book value each period, so depreciation shrinks as the book value declines. Unlike straight-line, this method does not subtract salvage value upfront, though depreciation stops once book value reaches salvage value.
Problem & Application
Accelerated methods like double declining balance let businesses recover the cost of equipment, vehicles, and furnishings faster, which can shelter income in profitable early years. For hospitality and rental operators investing heavily in furnishings or equipment, front-loaded depreciation can improve early cash flow when reinvestment needs are highest. Choosing between accelerated and straight-line affects the timing of deductions, not the total amount over the asset's life.
In Short
Double declining balance shifts deductions earlier in an asset's life, making it useful when front-loaded tax savings matter most.