DB function
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Depreciation
Payment Streams, Annuities, Loans
Securities
Coupons
Miscellaneous
DB
Returns the depreciation of an asset for a given year using the fixed rate declining-balance method.
Syntax:
DB(originalcost; salvagevalue; lifetime; year; months1styear)
- originalcost: the initial cost of the asset.
- salvagevalue: is the value at the end of the depreciation (sometimes called the salvage value of the asset).
- lifetime: the number of years over which the asset is being depreciated.
- year: the year number for which the depreciation is calculated.
- months1styear: the number of months in the first year (defaults to 12 if omitted).
- To calculate depreciation, DB uses a fixed rate throughout the asset’s life, given by
- rate = 1 - (salvagevalue/originalcost)^{(1/lifetime)}
- rounded to 3 decimal places.
- The depreciation in any year is given by
- value_at_start_of_year * rate
- where value_at_start_of_year = originalcost - depreciation_so_far.
- If months1styear is less than 12 the depreciation rate used for the first and last years is
- rate * number_of_months_in_year / 12.
Example:
DB(10000; 1000; 5; 1)
- returns approximately 3690 in currency units, which is the depreciation in the first year for an asset which cost 10000 and is written down to 1000 over 5 years.
Issues:
- This method underestimates total depreciation slightly if months1styear is given and not 12.
See Also