This document discusses the sum of the years' digits method of depreciation. It is an accelerated depreciation technique that allocates higher depreciation expenses in the early years of an asset's life. The method calculates depreciation as the depreciable base multiplied by the remaining useful life divided by the sum of the years' digits. An example is provided to illustrate the calculation. Some negative aspects are that it artificially reduces near-term profits and can indirectly impact cash flows by providing uneven depreciation amounts over the asset's life.

1. ACCOUNTING FOR MANAGERS
Presented By:
GROUP NO- 3
Ashish Sharma
Parul Ladhwe
Sum of the Years’ Digits
Method of Depreciation

2. Definition
Sum of the years' digits method of depreciation is one of
the accelerated depreciation techniques that allocates
higher depreciation expense in the earlier years of an
asset's useful life.
SYD Depreciation =
Depreciable Base ×
Remaining Useful Life
Sum of the Years' Digits

3. EXAMPLE
ABC Company purchases a machine for
$100,000. It has an estimated salvage value of
$10,000 and a useful life of five years.
Year
Remaining
estimated useful
life at beginning of
year SYD
Applicable
percentage
Annual
depreciation
1 5 5/15 33.33% $30,000
2 4 4/15 26.67 24,000
3 3 3/15 20.00 18,000
4 2 2/15 13.33 12,000
5 1 1/15 6.67 6,000
Totals 15 100.00% $90,000

4. Negative aspects
 A problem regarding this is that it artificially reduces the
reported profit of a business over the near term.
 The result is excessively low profits in the near term,
followed by excessively high profits in later reporting
periods.
 Use of the method can have an indirect impact on cash
flows.

5. CONCLUSION
 It provides higher depreciation to be charged in
the early years, and lower depreciation in the
later periods.