What Is Sum-of-the-Years' Digits?

Sum-of-the-years' digits (SYD) is an accelerated method for calculating an

asset's depreciation. This method takes the asset's expected life and adds
together the digits for each year; so if the asset was expected to last for five
years, the sum of the years' digits would be obtained by adding: 5 + 4 + 3 + 2 + 1
to get a total of 15. Each digit is then divided by this sum to determine the
percentage by which the asset should be depreciated each year, starting with the
highest number in year 1.

KEY TAKEAWAYS

 Sum-of-the-years' digits is an accelerated method for determining an

asset's expected depreciation over time.
 Depreciation is an accounting technique that involves pairing the cost of
using a tangible asset with the advantage gained over its useful life.
 Accelerated depreciation differs from standard depreciation by assuming
higher depreciation costs initially and lower costs in later years, reflecting
the fact that the benefit of using an asset will be diminished as the asset
ages.
 Standard depreciation, or straight-line depreciation, utilizes the same
monetary cost every year of the asset's useful life.
 It is best to use an accelerated depreciation method, such as the SYD
method, when an asset will lose most of its value toward the beginning of
its useful life
Understanding Sum-of-the-Years' Digits
Depreciation is a method of asset cost allocation that apportions an asset's cost
to expenses for each period expected to benefit from using the asset. Depending
on the chosen cost apportionment or depreciation rate, depreciation charges can
be variable, straight-lined, or accelerated over the useful life of an asset.

Accelerated depreciation uses decreasing charge methods, including the sum-of-

the-years' digits (SYD), providing higher depreciation costs in earlier years and
lower depreciation charges in later periods. Under the SYD method, the
depreciation rate percentage for each year is calculated as the number of years
in remaining asset life for the same year divided by the sum of remaining asset
life every year through the asset's life. As the depreciation rate decreases over
time, so does the depreciation charge.