Fixed Declining (Declining Balance) Depreciation Method

Accelerated depreciation methods applies a higher depreciation charge in the first year of an asset's life, with decreasing charges in the following years. This may better reflect the asset's expected benefit over its useful life. Many assets are most useful when they're new. One popular accelerated method is the fixed declining method.

For example, a business has an asset with $1,000 original cost, $100 salvage value, and five years (60 months) of useful life. The following table shows the fixed declining method of depreciation. Book Value at the start of the first year is the Original Cost of the asset. At any time, Book Value equals Original Cost minus Accumulated Depreciation.

Book Value = Original Cost - Accumulated Depreciation

The asset is depreciated until the Book Value equals the Salvage (or Scrap) Value.

General Notices