Double-Declining-Balance depreciation method (DDB)

Dictionary of Finance and Investment Terms for: Double-Declining-Balance depreciation method (DDB)
Double-Declining-Balance depreciation method (DDB)

method of accelerated depreciation, approved by the Internal Revenue Service, permitting twice the rate of annual depreciation as the straight-line method. It is also called the 200 percent decliningbalance method. The two methods are compared below, assuming an asset with a total cost of $1,000, a useful life of four years, and no salvage value.

A switch to straight-line from declining balance depreciation is permitted once in the asset’s life-logically, at the third year in our example. When the switch is made, however, salvage value must be considered.

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