What does the reducing balance method calculate for an asset?

The reducing balance method, also known as the declining balance method, is used to calculate depreciation expense for an asset over its useful life. This method applies a fixed percentage to the asset's carrying value each year, resulting in a decreasing amount of depreciation expense as the asset ages.

By using this method, higher depreciation expenses are recognized in the early years of an asset's life, reflecting the notion that assets tend to lose value more rapidly in their initial years of use. This approach aligns well with the matching principle in accounting, which seeks to align expenses with the revenues they help generate.

The other options do not align with the purpose of the reducing balance method. For instance, market value appreciation refers to an increase in the asset's value, which is not measured by depreciation methods. Similarly, net asset worth reflects the total value of an organization’s assets less its liabilities, while investment return measures the profitability of an investment, neither of which pertain to the calculation of depreciation using the reducing balance method.