declining-balance method of depreciation investment & finance definition

The most commonly used accelerated method of depreciation, which results in large depreciation expenses being taken in the early years of an asset’s life with smaller amounts of depreciation allocated to later years. Depreciation is computed by applying a fixed rate to the carrying value, or resale value, of the assets. Any fixed rate can be used; however, if twice the straight-line percentage is used, then it is referred to as the double-declining-balance method. The declining-balance method may be appropriate in industries where equipment and technology changes quickly. It also makes sense from the perspective that an asset has more value and provides better results in its early years.