Sum-Of-The-Years' Digits

AAA

DEFINITION of 'Sum-Of-The-Years' Digits '

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.

INVESTOPEDIA EXPLAINS 'Sum-Of-The-Years' Digits '

It makes sense to use an accelerated depreciation method such as the SYR method when an asset will lose most of its value toward the beginning of its useful life - as is the case with automobiles, for example.


In the five year example above, the SYD method would yield the following depreciation schedule:


Year 1: 5/15 = 33%


Year 2: 4/15 = 27%


Year 3: 3/15 = 20%


Year 4: 2/15 = 13%


Year 5: 1/15 = 7%


The percentages for each year should add up to 100%.

RELATED TERMS
  1. Unit of Production Method

    A depreciation procedure used for property that is not in continuous ...
  2. Sinking Fund Method

    A technique for depreciating an asset in bookkeeping records ...
  3. Economic Depreciation

    A measure of the decrease in value of an asset over a specific ...
  4. Depreciation Recapture

    The gain received from the sale of depreciable capital property ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  6. Salvage Value

    The estimated value that an asset will realize upon its sale ...
Related Articles
  1. Active Trading

    An Introduction To Depreciation

  2. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining ...

  3. Investing

    What is the difference between amortization ...

  4. Investing Basics

    What's the difference between capital ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center