Declining-balance method

declining-balance method of depreciation
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset.

declining-balance method
method of accelerated depreciation where a percentage rate of depreciation is applied to the undepreciated balance, not to the original cost.

DECLINING-BALANCE METHOD - An accounting method of depreciation for income-tax purposes designed to pro...
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[edit] Declining-Balance Method
Depreciation methods that provide for a higher depreciation charge in the first year of an asset's life and gradually decreasing charges in subsequent years are called accelerated depreciation methods.

Declining-Balance Method (business term)
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An alternative approach is to use the declining-balance method, which assumes that an asset loses value more rapidly in the early part of its useful lifetime. In the case of machinery, this is often a more realistic approach.

As you can see, the straight-line method results in the same deduction amount every year, while the declining-balance method results in larger deductions in the first years and much smaller deductions in the last two years.

The most commonly used modified accelerated cost recovery system (MACRS) for calculating depreciation. A general depreciation system uses the declining-balance method to depreciate personal property.

See also: Mergers, Useful life, Acquisitions, Residual value, Accelerated depreciation