sum-of-years digits depreciation

A method of calculating depreciation expenses in which the depreciation expense steadily declines over the depreciation period because a successively smaller fraction is applied each month to the asset's original cost minus its salvage value. The basic formula is:

Current Depreciation Expense = (Cost Purchase - Salvage Value) * Remaining Useful Life

Remaining useful life is calculated by:

Number of Remaining Months of Life/Sum of Digits Representing Depreciation Period

For example, if an item has a depreciation period of 6 months, then the denominator is 21; that is, the sum of the digits prior to and including 6 (6+5+4+3+2+1). In the first period, the number of remaining months is 6; therefore, the formula is:

Current Depreciation Expense = (Cost Purchase - Salvage Value) *6/21

In the second month, the number of remaining months is 5; therefore, the formula is:

Current Depreciation Expense = (Cost Purchase - Salvage Value) *5/21

Note that although the name of this method implies that you sum the digits of an asset's years of estimated life, the Archibus calculates depreciation by summing the digits of an asset's months of estimated life.