The DDB function calculates the depreciation of an asset for a given time period based on the double-declining balance method (see note below).
|cost||The original cost of the asset|
|salvage||The salvage value after the asset has been fully depreciated|
|life||The useful life of the asset or the number of periods that you will be depreciating the asset|
|period||The period that you wish to calculate the depreciation for. Use the same units as for the life|
|[factor]||Optional. The rate at which the balance declines
The following spreadsheet shows the DB function is used to calculate the annual depreciation of an asset that cost $10,000 at the start of year 1, and has a salvage value of $1,000 after 5 years. [factor] is omitted from the function and assumes a value of 2.
|7||Year||Formula||Result||EOP Value||Accumulated Depreciation|
Note: The annual rate of depreciation in example above, calculated from the equation 1-(Salvage/Cost)^(1/Life), is calculated to be 40.0% for years 1-4 years, then 22.8% for the 5th year.
Common Function Error(s)
|Problem||What went wrong|
|#VALUE!||Occurs if any of the supplied arguments are not numeric values|
When calculating the depreciation of an asset, it is common to use an accelerated depreciation calculation, in which the calculated value of an asset is reduced by a larger amount during the first period of its lifetime, and smaller amounts during subsequent periods.
One of the most popular accelerated depreciation methods is the Double Declining-Balance Method, in which the straight-line depreciation rate is doubled. A useful example of this is provided on the Wikipedia depreciation page
The Excel DDB function uses the following equation to calculate the depreciation:
- salvage = final value of the asset at the end of its lifetime
- value = value of the asset at the start of the period
(= Initial cost – total depreciation from previous periods)
- life = number of periods over which the depreciation occurs