Syntax. VDB(Cost,Salvage,Life,Start_Period,End_Period,Factor,No_Switch)
Definition. This function calculates the depreciation amounts by using the geometrically degressive depreciation method. Optionally, it can be checked to change the depreciation method into linear depreciation (as might be suggested by tax regulations).
Arguments
Cost (required) The purchase cost (net purchase price plus incidental purchase expenses minus reduction of purchase cost) of an asset. If you don’t use a value that can be evaluated as a number, the error #VALUE! is displayed. If the entered number is negative, the error #NUMBER! is displayed.
Salvage (required) The value of the asset at the end of the depreciation duration. If you don’t use a number, the error #VALUE! is displayed. If the entered number is negative, the error #NUMBER! is displayed.
Life (required) The number of periods in which the asset is depreciated. You should use an integer greater than zero for this argument.
Start_Period (required) The period within the depreciation duration at the end of which the calculation of the depreciation amount (possibly summed up over several periods) should begin. The first period has the number zero.
End_Period (required) The period within the depreciation duration at the end of which the calculation of the depreciation amount (possibly summed up over several periods) should end.
Factor (optional) The multiplier for the (assumed linear) depreciation rate (reciprocal to the depreciation duration). If this argument is not specified, Excel calculates with the number 2.
No_Switch (optional) A logical value indicating whether there should be a switch to linear depreciation (because of larger depreciation amounts; see the explanations later in this section). If this argument is FALSE or not specified, the (possibly summed-up) depreciation amount is determined by changing to linear depreciation.
Background. Depreciation is used to determine the loss of value of an asset and make that loss visible. It should not be confused with depreciation because of abrasion/use, which refers to the cost of purchasing an asset as part of operation expenses from a tax point of view.
The depreciation percentage used by the function VDB() is determined from the inverse of the depreciation duration multiplied by a factor. If this argument is not specified, Excel calculates with the number 2. The book value at the start of the depreciation period is multiplied by the depreciation percentage. The resulting amount reduces the book value at the end of the period.
The function can also check whether such a depreciation amount is less than the amount that would be created by switching to the linear depreciation (the original residual value), and if that is the case it switches to linear depreciation.
This form of the depreciation method (including the switch to linear depreciation) is permitted within the tax law of some countries. Sometimes there are certain requirements concerning the initial depreciation percentage. These requirements can be regulated by using the factor.
If a fractional part of the year in the first period must receive special consideration, the function VDB() usually cannot be used without additional manual calculations. Recording the depreciation plan by using the percentage calculation and arithmetic links of individual cells is therefore more likely to allow you to achieve the goal.
Example. An asset with a purchase cost of $1,000.00 is to be depreciated in 10 years to a residual value of $100.00 by using the geometric-degressive method. You can calculate the depreciation amount in each period by using VDB() and subtract it from the book value of the previous period.
Alternatively, you can create a depreciation plan that implements the formulas for calculating the first depreciation amount as well as the processes for calculating the other amounts.