what does the declining balance method tell you 
the declining balance method is also known as the reducing balance method it s ideal for assets that quickly lose their value or inevitably become obsolete this is classically true with computer equipment cell phones and other high tech items that are generally useful earlier on but become less so as new models are brought to market an accelerated method of depreciation ultimately factors in the phase out of these assets employing the accelerated depreciation technique means there will be lesser taxable income in the earlier years of an asset s life 2the declining balance technique represents the opposite of the straight line depreciation method which is more suitable for assets whose book value drops at a steady rate throughout their useful lives the straight line depreciation method simply subtracts the salvage value from the cost of the asset and this is then divided by the useful life of the asset the annual straight line depreciation expense would be 2 000 15 000 minus 5 000 divided by five if a company shells out 15 000 for a truck with a 5 000 salvage value and a useful life of five years declining depreciation vs the double declining methodit may signal that a company is using accelerated depreciation methods such as the double declining balance depreciation method if it often recognizes large gains on sales of its assets net income will be lower for many years but this ultimately leads to a bigger gain when the asset is sold because book value ends up being lower than market value its sale could portray a misleading picture of the company s underlying health if the asset is still valuable 