What is Double Declining Balance Depreciation?
Double declining balance (DDB) is an accelerated depreciation method that applies twice the straight-line rate to the asset’s beginning-of-year carrying amount each year, ignoring residual value during the calculation until the carrying amount approaches it.
How It Works
- Compute the straight-line rate = 1 ÷ useful life.
- Double the rate to obtain the DDB rate.
- Multiply the DDB rate by the carrying amount at the start of each year.
- Record depreciation expense and reduce the carrying amount.
- Stop depreciating when the carrying amount equals the residual value.
Saudi Context
DDB is accepted for IFRS reporting under IAS 16 if it reflects the consumption pattern, especially for technology and electronic equipment. ZATCA income tax follows its own depreciation tables, not DDB, so a deferred tax difference often arises.
Example
Asset cost SAR 100K, useful life 5 years (straight-line rate 20%, DDB rate 40%). Year-1 depreciation = 100,000 × 40% = SAR 40,000. Year-2 = 60,000 × 40% = SAR 24,000.