Ordinary declining-balance methods pick a rate from the useful life alone and then need a salvage floor or a switch to straight-line to finish neatly. The fixed declining balance method takes the opposite approach: it solves for the one rate that, applied to book value every year, carries the asset from its cost down to its salvage value. This is the method used by the DB function in Excel, Google Sheets and similar spreadsheets, and this calculator reproduces it exactly — including its three-decimal rate rounding and its first-year month count.
How to use the calculator
- Enter the asset cost, salvage value (greater than zero) and useful life in years.
- Choose the months in service in the first year. The spreadsheet function calls this the month argument.
- Keep round the rate to 3 decimals ticked to match spreadsheet output, or untick it for the exact rate.
The spreadsheet check shown in the results reproduces year 1; change the fourth argument to get any other year.
Fixed declining balance formulas
- Year 1: Cost × Rate × Months ÷ 12
- Years 2 to Life: (Cost − Accumulated depreciation) × Rate
- Extra final year (only when Months < 12): (Cost − Accumulated depreciation) × Rate × (12 − Months) ÷ 12
Worked example
This is the classic spreadsheet illustration: equipment costing $1,000,000 with a $100,000 salvage value and a 6-year life, placed in service with 7 months left in the first year.
- Exact rate: 1 − (100,000 ÷ 1,000,000)1/6 = 0.318708, rounded to 0.319
- Year 1: $1,000,000 × 0.319 × 7/12 = $186,083.33
- Year 2: ($1,000,000 − $186,083.33) × 0.319 = $259,639.42
- Year 3: $176,814.44; year 4: $120,410.64; year 5: $81,999.64; year 6: $55,841.76
- Year 7 (the remaining 5 months): $119,210.77 × 0.319 × 5/12 = $15,845.10
Total depreciation is $896,634.33 and the final book value is $103,365.67 — near, but not exactly at, the $100,000 salvage value, because of the rounded rate and the partial year.
A full-year example
For a $10,000 asset with a $1,000 salvage value and a 5-year life used all of year 1, the exact rate is 36.904%:
| Rate used | Year 1 | Year 5 | Final book value |
|---|---|---|---|
| 0.369 (rounded) | $3,690.00 | $584.98 | $1,000.34 |
| 0.369043 (exact) | $3,690.43 | $584.89 | $1,000.00 |
With the exact rate and a full first year, the schedule lands precisely on salvage. The 34 cents of difference in the rounded version is the price of matching spreadsheet output.
When to use fixed declining balance
- Rebuilding spreadsheet results in reports, audits and coursework that use the DB function.
- Assets with meaningful residual value, such as vehicles and aircraft, where a salvage-driven rate reflects expected market value better than a life-only rate.
- Reducing-balance accounting in jurisdictions that prescribe a rate based on residual value.
When salvage is small, the fixed rate becomes very steep — with salvage at 1% of cost over 5 years, the rate is about 60% — so a double declining balance or variable declining balance schedule is usually more sensible. For a side-by-side view of common methods, open the depreciation calculator.
Results are estimates for planning, coursework and bookkeeping, not accounting or tax advice.
Frequently asked questions
What is the fixed declining balance method?
A declining-balance method whose rate is chosen so that the asset's book value falls from cost to salvage value over its life. The rate is 1 − (salvage ÷ cost)^(1 ÷ life), applied to book value each year, so no switch to straight-line is needed.
Why is the rate rounded to three decimals?
That is how the DB worksheet function in common spreadsheets computes it. Rounding makes results match spreadsheet output to the cent, but it means the final book value lands slightly above or below salvage. Untick the box to use the exact rate.
What does the 'months' input do?
It is the number of months the asset is in service in the first year. Year 1 depreciation is cost × rate × months ÷ 12, and if months is less than 12 an extra final year takes book value × rate × (12 − months) ÷ 12.
Why can't salvage value be zero?
With zero salvage the formula gives a rate of 100%, which would write the entire cost off in the first period. Use a straight-line or double declining method for assets with no residual value.
How does this differ from double declining balance?
Double declining uses a rate based only on life (2 ÷ life) and ignores salvage until the end. The fixed declining rate is derived from both cost and salvage, so it is lower when salvage is high and higher when salvage is low.