How do you calculate double-declining balance depreciation and when do you switch to straight-line?

Double-declining balance (DDB) is an accelerated depreciation method that front-loads depreciation expense. The switch to straight-line happens when straight-line depreciation on the remaining book value exceeds the DDB amount.

DDB Formula:

Depreciation = (2 / Useful Life) x Beginning Book Value

Note: salvage value is not subtracted from the depreciable base in DDB, but you cannot depreciate below salvage value.

Full Example:

Oakridge Manufacturing purchases equipment for $100,000 with a 5-year useful life and$10,000 salvage value.

DDB rate = 2 / 5 = 40%

Year	Beg. Book Value	DDB Depreciation	SL on Remaining*	Use Which?	Depreciation	End Book Value
1	$100,000	$40,000	$18,000	DDB	$40,000	$60,000
2	$60,000	$24,000	$16,667	DDB	$24,000	$36,000
3	$36,000	$14,400	$13,000	DDB	$14,400	$21,600
4	$21,600	$8,640	$11,600	SL	$11,600	$10,000
5	$10,000	—	—	—	$0	$10,000

*SL on Remaining = (Book Value - Salvage) / Remaining Years

The switch logic explained:

• Year 1: DDB ($40,000) > SL ($90,000/5 = $18,000) → use DDB
• Year 2: DDB ($24,000) > SL ($50,000/3 = $16,667) → use DDB
• Year 3: DDB ($14,400) > SL ($26,000/2 = $13,000) → use DDB
• Year 4: DDB ($8,640) < SL ($11,600/1 = $11,600) → switch to SL

You switch in Year 4 because straight-line now produces a larger depreciation charge. From the switch point onward, you depreciate the remaining book value minus salvage evenly over the remaining life.

Why switch? Without switching, DDB would never fully depreciate the asset to salvage value because it keeps taking a percentage of a shrinking base. The switch ensures the asset reaches exactly the salvage value by the end of its useful life.

Exam tip: The CFA exam may give you a DDB problem and ask for depreciation in a specific year. Always check whether the switch point has been reached by comparing DDB and SL amounts each year.

For more depreciation practice, visit our AcadiFi question bank.