1. Sum of Years’ Digits Method (SYD)
Sum of Year’s Digits (SYD) method is an accelerated depreciation method that assigns a larger depreciation expense in the earlier years of an asset’s life. It is based on the sum of the digits of the asset’s useful life.
Formula:
First, calculate the sum of the digits for the asset’s useful life.
Sum of Years’ Digits = [n(n+1)] / 2
Where is the asset’s useful life (in years).
2. The depreciation for each year is calculated by applying a fraction of the depreciable base to the sum of the digits.
2. Production Units Method
Production Units Method of depreciation allocates depreciation based on the actual usage or production of an asset, making it a more variable method. This method is commonly used for machinery or vehicles where wear and tear are directly linked to their usage.
Formula:
Depreciation per Unit = Depreciable Base / Total Estimated Units of Production
Then, for each year:
Depreciation for the Year = Depreciation per Unit × Units Produced in the Year