What is the primary characteristic of the diminishing value method of depreciation?

The primary characteristic of the diminishing value method of depreciation is that it results in larger depreciation expenses in the earlier years of an asset's useful life. This method calculates depreciation based on a fixed percentage of the asset's carrying amount at the beginning of each year, which means that since the carrying amount decreases over time, the absolute dollar amounts of depreciation also decrease over the years.

This front-loaded approach reflects the assumption that an asset is typically more productive or valuable in its initial years. As a result, it recognizes the larger wear and tear, obsolescence, or reduction in economic benefits that the asset provides when it is new.

The diminishing value method contrasts with other methods, such as straight-line depreciation, where the same amount is allocated each year, leading to consistent depreciation expenses. Additionally, while the diminishing value method can be applied to both physical and some intangible assets, it is not limited solely to physical assets. Lastly, it does not allocate the same total depreciation over the asset's life, as the total depreciation recognized differs because it decreases over time.