Financial Glossary
Double Declining Balance Method (DDB)
The double declining balance (DDB) method is an accelerated depreciation technique that records larger depreciation expense in an asset's early years and smaller amounts later. It applies double the straight-line rate to the asset's remaining book value each period, rather than to its original cost, so the expense declines as the book value shrinks. Depreciation continues until the asset reaches its salvage value.
Problem & Application
Businesses that buy equipment losing value quickly, such as vehicles, computers, or appliances in a hospitality operation, often prefer DDB because it matches expense to the years the asset is most productive and can reduce taxable income sooner. The catch is that financial statements show lower early profits and the calculation requires tracking book value each period rather than a flat annual figure. Choosing a depreciation method has both reporting and tax consequences worth modeling.
In Short
DDB front-loads depreciation, accelerating the write-off compared with the straight-line method. It suits assets that lose value fast, but it complicates the schedule you have to maintain.