sumoftheyears

The sum of the years' digits depreciation method, often abbreviated as SYD, is an accelerated depreciation method used in accounting. It calculates depreciation expense by applying a fraction to the depreciable cost of an asset. The fraction's numerator is the number of years remaining in the asset's useful life, and the denominator is the sum of the digits of the asset's useful life. For example, an asset with a useful life of 5 years would have a denominator of 5 + 4 + 3 + 2 + 1 = 15. In the first year, the depreciation rate would be 5/15, in the second year 4/15, and so on, decreasing each year.

The depreciable cost is the asset's original cost minus its salvage value. The SYD method results in higher depreciation expenses in the early years of an asset's life and lower expenses in later years. This acceleration can provide tax benefits by reducing taxable income in the initial years. Compared to straight-line depreciation, which spreads the depreciation expense evenly over the asset's life, SYD recognizes the fact that assets often lose more value in their early years. It is a permissible method under U.S. Generally Accepted Accounting Principles (GAAP) and is often used for tangible assets that are expected to become obsolete or less productive over time.