What is the difference between straight-line and reducing-balance?

Straight-line charges an equal amount every year. Reducing-balance applies a fixed rate to the remaining book value, so the charge is higher at first and falls over time.

How is the reducing-balance rate derived when I leave it blank?

The calculator uses the geometric rate 1 minus the fifth root of salvage over cost (generalised to the life you enter), which brings the book value to the salvage value at the end of the useful life.

Does depreciation ever go below salvage value?

No. The charge is capped so the book value never falls below the salvage value you enter, under either method.

Which standard covers depreciation?

IAS 16 under IFRS and ASC 360 under US GAAP both require a systematic allocation of a depreciable amount over an asset useful life. The method and estimates are a matter of policy.

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Free tool

Depreciation calculator

Work out annual depreciation and a full year-by-year schedule for an asset. Choose the straight-line or reducing-balance method, and see the book value fall from cost to salvage.

Asset details

Method

Asset cost

The purchase price of the asset.

Salvage value

The residual value expected at the end of the useful life.

Useful life (years)

Whole years over which the asset is depreciated.

Depreciation

First-year charge1,800

Total depreciation9,000

Rate applied—

Year-by-year schedule

Year	Opening	Depreciation	Closing
1	10,000	1,800	8,200
2	8,200	1,800	6,400
3	6,400	1,800	4,600
4	4,600	1,800	2,800
5	2,800	1,800	1,000

How it works

Two ways to spread a cost

Depreciation spreads the cost of an asset over the years it is used. The two most common methods differ in how quickly the cost is charged.

Straight-line

An equal charge each year: cost minus salvage, divided by the useful life. Simple and steady, it suits assets that lose value evenly over time.

Reducing balance

A constant rate on the falling book value, so the charge is larger in early years and tapers off. It suits assets that lose most value soon after purchase.

A schedule, not a filing

The method, rate, useful life, and residual value used in real books follow your policy and the standard you report under. Treat this as an example to sense-check a figure.

Sources

Depreciation method and rate depend on accounting policy. Check the treatment against the standards below.

This is an example schedule based on the inputs and the general formula. It is not accounting or tax advice. Confirm the method and figures against your accounting policy and the applicable standard.

Keep fixed assets and depreciation in one ledger

Rivane tracks assets, schedules, and postings together, so depreciation is a report, not a spreadsheet.

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