|
|
If the Book value calculation for the last period is less than the Residual value, Datastream 7i will adjust the Depreciation expense so that the Book value will equal the Residual value in the last period. |
Double declining balance depreciation is an accelerated method of depreciation that is also based on the principle that the greatest depreciation occurs during the early years of an asset’s life. Using the double declining balance method, double the value of the straight line depreciation expense is taken the first year of an asset’s estimated useful life, and then that same percentage is multiplied by the book value of the asset (the cost of the asset minus the accumulated depreciation) at the beginning of the subsequent years in the asset’s life.
To calculate the double declining balance depreciation values, Datastream 7i generates intermediate calculations that determine the annualized double declining balance depreciation rate and the annual depreciation rate, which are then used in the final depreciation calculations. Datastream 7i calculates the annualized depreciation based on the on the following formula:
(Original value – Residual value) / Estimated useful life in years
Datastream 7i calculates the intermediate annualized straight line depreciation rate based on the following formula:
Annual depreciation expense / (Original value – Residual value) = Straight line depreciation rate
Datastream 7i then calculates the finalized double declining balance depreciation expense based on the following formula:
Book value x– (2 x Straight line depreciation rate) = Double declining balance annual depreciation expense
After determining the amount of the annual depreciation for the asset, Datastream 7i subtracts this value from Original value for the depreciation expense for the first year, and then it subtracts this value from the Book value of the asset for each subsequent year of the asset’s useful life.
The book value of the asset for the previous period is then used in the formula for determining the book value for each subsequent period by calculating the difference of the previous period book value and the depreciation expense for that period.
|
|
If the Book value calculation for the last period is less than the Residual value, Datastream 7i will adjust the Depreciation expense so that the Book value will equal the Residual value in the last period. |
When entering depreciation data for double declining balance depreciation, select Double declining balance as the Depreciation method, and then enter values for Original value, Estimated useful life, the unit of measure, and Residual value.
