Documentation/How Tos/Calc: DB function

DB

Returns the depreciation of an asset for a given year using the 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 is 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.

See also:

DDB

Derivation of Financial Formulas

Financial functions

Issues:

• This function underestimates depreciation slightly if months1styear is not 12; this is likely to be a standard approach with this method.