When it comes to depreciation, no two businesses are alike. Unlike traditional straight line depreciation where the asset value is costed out to depreciation expense in equal increments over a given life expectancy, accelerated depreciation expenses the cost at higher values during the earlier accounting periods and at a lower amount towards the last half of the asset’s life expectancy.
Double Declining Balance Method
The double declining balance method is an accelerated method of depreciation used in business. The basic formula is two times the straight line depreciation times the remaining book balance of the particular asset. It is one the methods used when the business desires an extremely high depreciation value in the early part of the life expectancy of the asset.
The double declining balance method is an effective and appropriate depreciation method for certain fixed asset industries such as road/bridge builders, utility companies, marine industry and mining. It is inappropriate for real estate, livestock, forestry or other asset stable industries.