Sum of the Years’ Digits Method of Depreciation:
Learning Objectives:

Explain the sum of the years’ digits method of depreciation.
Definition and Explanation:
Sum of the Years’ Digits Method an accelerated method of depreciation which is also based on the assumption that the loss in the value of the fixed asset will be greater during the earlier years and will go on decreasing gradually with the decrease in the life of such asset. The SYD method is found by estimating an asset’s useful life in years, then assessing consecutive numbers to each year, and totaling these numbers. For n years:
SYD = 1 + 2 + 3 + 4 + …… + n
For example if the useful life of an asset is 5 years, the SYD method would be 1 + 2 + 3 + 4 + 5 = 15. Determining the SYD factor by simple addition can be somewhat laborious for longlived assets. For these assets the formula n (n + 1) / 2 where n = the number of periods in the asset’s useful life can be applied to derive the syd method. In our example, we have:
5(5 + 1)  =  30  


=  15  
2  2 
The yearly depreciation is then calculated by multiplying the total depreciable amount for the life of the asset by a fraction whose numerator is the remaining useful life and whose denominator is the SYD method. Thus in our example the calculation would:
First year depreciation  =  5/15  ×  Depreciation cost 
Second year depreciation  =  4/15  ×  Depreciation cost 
Third year depreciation  =  3/15  ×  Depreciation cost 
Fourth year depreciation  =  2/15  ×  Depreciation cost 
Fifth year depreciation  =  1/15  ×  Depreciation cost 
The formula for depreciation for this method is:
Depreciation = Depreciation cost × (Remaining useful life/SYD) 
Example:
ABC Ltd. purchased a truck for $65,000 on 1st January 1991. The expected life was 5 years and salvage value $5,000. Calculate the annual depreciation expense by applying sumoftheyears’ digits (SYD) method.
Solution:
Amount to be written of = $65,000 – 5,000 = 60,000
SYD = 1 + 2 + 3 + 4 + 5 = 15
The annual depreciation is:
First year depreciation  =  5/15  ×  60,000  =  20,000 
Second year depreciation  =  4/15  ×  60,000  =  16,000 
Third year depreciation  =  3/15  ×  60,000  =  12,000 
Fourth year depreciation  =  2/15  ×  60,000  =  8,000 
Fifth year depreciation  =  1/15  ×  60,000  =  4,000 


Total  60,000  

When the asset is acquired during the year, the depreciation expense may be determined by dividing the fractional multipliers between the current and succeeding year. Using the data in the above example suppose the truck is purchased on 30thJune 1991, the depreciation is computed as follows:


End of the year  Depreciable cost  Years’ fraction  Years’ depreciation  Accumulated depreciation  Cost  Book value  


1.  60,000  5/15 (1/2)  10,000  1,000  65,000  55,000  
2.  60,000 60,000 
]  5/15 (1/2) 4/15 (1/2) 
10,000 8,000 
28,000  65,000  37,000 
3.  60,000 60,000 
]  4/15 (1/2) 3/15 (1/2) 
8,000 6,000 
42,000  65,000  23,000 
4.  60,000 60,000 
3/15 (1/2) 2/15 (1/2) 
6,000 4,000 
52,000  65,000  13,000  
5.  60,000 60,000 
]  2/15 (1/2) 1/15 (1/2) 
4,000 2,000 
58,000  65,000  7,000 
6.  60,000  1/15 (1/2)  2,000  60,000  65,000  5,000  

Scope of the Sum of Years’ Digits Method (SYD):
As an accelerated depreciation method, the SYD approach is most appropriate for those situations in which the asset is judged to render greater utility during its earlier life and less in its later life.
You may also be interested in other articles from “accounting for depreciation” chapter:
 Definition and Explanation of Depreciation
 Causes of Depreciation
 Need for Depreciation
 Depreciation, Depletion and Amortization
 Difference Between Depreciation and Fluctuation
 Basic Factors of Determination of Depreciation
 Depreciation Methods / Methods for Providing Depreciation
 Fixed Installment Method / Straight Line Method / Original Cost Method
 Diminishing balance/written Down Value/Reducing Installment Method of Depreciation
 Annuity Method of Depreciation
 Depreciation Fund Method or Sinking Fund Method
 Insurance Policy Method of Depreciation
 Revaluation Method of Depreciation
 Sum of the Years’ Digits Method of Depreciation
 Double Declining Balance Method of Depreciation
 Depletion Method of Depreciation
 Basis of Use System of Depreciation
 Depreciation Of Various Assets
 Depreciation Accounting – General Questions and Answers
Other Related Accounting Articles:
 Basic Factors of Determination of Depreciation
 Basis of Use System of Depreciation
 Fixed Installment Method or Straight Line Method or Original Cost Method of Depreciation
 Diminishing Balance Method of Depreciation
 Depreciation, Depletion and Amortization
 Depreciation Methods
 Definition, Explanation and Characteristics of “Depreciation” or “Accounting Depreciation
 Depletion Method of Depreciation
 Depreciation Accounting – General Questions and Answers
 Accounting For Depreciation
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