What Is Double Declining Depreciation?

The double declining balance method refers to an accelerated depreciation method that calculates the depreciation amount by multiplying the opening net book value of each period of fixed assets by a fixed percentage without considering the estimated residual value of the fixed assets. ^[1]

Double declining balance method

Double declining balance method ^[2]

(1) Annual depreciation rate = 2 ÷ estimated depreciation

Example 1. An enterprise purchased and put into use a fixed asset for production that is in constant vibration and super-intensive use on December 20, 1998. The original price was 400,000 yuan, and the expected useful life was 5 years. On December 30, 2001, the fixed asset impairment provision of 20,000 yuan was withdrawn according to regulations. On December 28, 2003, the fixed asset was disposed of at a variable price and received a variable income of 11,000 yuan (assuming no other relevant considerations were taken into account)

1. When using the double declining balance method, pay attention to the net book value of fixed assets less the estimated net value when depreciation is made in the last two years.

Techniques of double declining balance method in calculating depreciation of fixed assets

The double declining balance method is based on the beginning of each year without considering the estimated net residual value of fixed assets.

The calculation rules for the double declining balance method provided by the current system are only a principled framework. There is no widespread universality of the provisions on the depreciation method in the last two years. In particular, it is not possible to move the hard line, but must be based on the estimated level of net residual value. Follow the requirements of the principle of prudence, use the accelerated depreciation method to the greatest extent possible, and also ensure that the net residual value is retained in the final year. Therefore, the processing of the depreciation calculation in the final year of the double declining balance method is actually the result of balancing the basic principles of accelerated depreciation with the basic calculation rules for double declining balance. Several situations in which the double declining balance method should be amended can be summarized as follows:

First, when the net residual value rate is large, pay attention to the negative depreciation in the last year, and the average age method should be adopted as early as possible.

2. When the double-declining balance can be used normally in the penultimate year without affecting the net salvage value, and at the same time the accelerated depreciation method is met throughout the year, the double-declining balance method should be used to the end, without having to stick to the "last two years" "limits.

3. When the calculation result of the modified average method in the last two years conflicts with the accelerated depreciation principle, the accelerated depreciation requirements shall be complied with, and the depreciation method may be changed to the previous year.

For this reason, when applying the double-declining balance method to depreciation in practice, we should have a reasonable plan for the calculation of depreciation for each period of fixed assets, especially when dealing with the depreciation calculation of the last year, we should comprehensively consider possible depreciation. The above various factors, properly handle the modification of the double declining balance method to avoid unnecessary accounting corrections.