Diminishing balance depreciation, also known as the declining balance method, is an accelerated depreciation technique where a fixed percentage of the remaining book value of an asset is depreciated each period. This method results in higher depreciation expenses in the earlier years and lower expenses in the later years of an asset's useful life.

The formula for calculating the annual depreciation under the diminishing balance method is: Annual Depreciation = (Asset Cost - Accumulated Depreciation - Residual Value) × Depreciation Rate

The depreciation rate is typically a percentage, usually double the straight-line rate. However, it can be adjusted based on the company's policy or the asset's expected wear and tear pattern.

This method is commonly used for assets that experience more significant wear and tear in their early years or for businesses that want to expense the cost of assets more quickly for tax purposes. It's important to note that when using this method, the depreciation may be switched to the straight-line method in the latter years to ensure that the asset is fully depreciated by the end of its useful life.