Sum of Years' Digits — Rate
This formula gives you the depreciation rate (DR) for a single year under the "sum-of-years'-digits" method. Like double-declining, this is an accelerated method—meaning it records more of an asset's value loss in the early years and less in the later years. Depreciation itself is just how we spread an asset's cost across the years we use it.
To find the rate, you put the "years remaining" (how many years of useful life the asset still has, counting the current year) on top, and the "sum of the digits" (a single total you calculate once for the whole asset's life) on the bottom. So DR = years remaining ÷ sum of digits. This rate is then multiplied by the asset's depreciable cost to get that year's expense.
Read the result as a fraction or percentage of the total value that gets written off this year. In the first year the "years remaining" is largest, so the rate is highest; each year afterward it gets smaller. A project manager uses this when they want a smooth, gradually decreasing depreciation schedule that still front-loads the expense.
Think of it like eating the biggest slice of cake first and taking smaller slices as the plate empties—each year you take a thinner slice of the value, and the slices always add up to the whole cake.
Imagine an asset with a 4-year useful life. First, find the sum of digits: 4 + 3 + 2 + 1 = 10. Year 1: years remaining = 4, so DR = 4/10 = 40%. Year 2: years remaining = 3, so DR = 3/10 = 30%. Year 3: years remaining = 2, so DR = 2/10 = 20%. Year 4: years remaining = 1, so DR = 1/10 = 10%. Notice the rates add up to 100% and steadily decrease. If the asset's depreciable cost were $9,000, Year 1's expense would be 40% × $9,000 = $3,600, and Year 4's would be just 10% × $9,000 = $900.
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