To calculate Sum of Year Digits depreciationIn the sum of Years Digits depreciation method, a fraction of an asset's depreciable cost is written off each year. The fraction is formed by a numerator equal to the remaining life of the asset, and a denominator equal to the sum of the number of the years of the asset's life. LN considers whether the asset has a life that ends evenly on a year-end boundary when it calculates the sum of years in the life. If the life ends in the middle of a year, LN uses a decimal amount in the sum of years calculation. For example, if you have an asset with a life of five years, LN calculates a denominator of fifteen, computed as follows: (5 + 4 + 3 + 2 + 1) = 15 For an asset with a life of five years and three months, the sum of the years digits is 16.25, computed as follows: (5.25 + 4.25 + 3.25 + 2.25 + 1.25) = 16.25 LN uses the resulting fraction to determine the annual depreciation amount. After calculating the annual depreciation expense, LN then proportionally divides each year's expense across the number of periods for that year. Example Years of depreciation = 5 cost = $ 10,000 Depreciation: year 1: $ 10,000 * 5 / 15 = $ 3,333.33 year 2: $ 10,000 * 4 / 15 = $ 2,666.67 year 3: $ 10,000 * 3 / 15 = $ 2,000.00 year 4: $ 10,000 * 2 / 15 = $ 1,333.33 year 5: $ 10,000 * 1 / 15 = $ 666.67 Sum: $10,000.00 Note If the asset for which you are calculating depreciation contains an averaging convention, LN adjusts the depreciation expense for the first half-year, quarter, or month calculation. For more information, refer to Calculations and Averaging Conventions. Sum of Years Digits (SYD) has two variations based on the calculation mode in use for the asset in its related books:
SYD daily In the Sum of Years Digits Daily formula, LN considers the exact number of days in each period when calculating the depreciation expense for each period. LN performs three steps each time it calculates depreciation:
The following formulas are used:
Depreciation = (cost - salvage - Sec179) * (business percentage/100) * (remaining years in life / sum of years)
Depreciation = (cost - salvage) * (remaining years in life / sum of years) For MACRS and ACRS the salvage value is not applied to depreciation of U.S. tax and commercial books. To calculate the current period's depreciation: [(current year's depreciation / 365) * days in period] + [change per period * (x - y - days in the period)] The following applies to the above formula: change per period = (current year's depreciation - next year's depreciation) / 365 / 365 x = [ ( 184 - days from the start of the year to the start of the current period) * ( 185 - days from the start of the year to the start of the current period) ] / 2 y = [ ( 184 - days from the start of the year to the start of the current period days in the current period) * ( 185 - days from the start of the year to the start of the current period - days in the current period) ] / 2 SYD periodic In the Sum of Years Digits Periodic formula, LN considers the exact number of days in each period when calculating the depreciation expense for each period. LN performs three steps:
The following formulas are used:
Depreciation = (cost - salvage - Sec179) * (business percentage / 100) * (remaining years in life / sum of years)
Depreciation = (cost - salvage) * (remaining years in life / sum of years) For MACRS and ACRS the salvage value is not applied to depreciation of U.S. tax and commercial books.
( current year's depreciation / 12) + (change per period * [ (number of periods + 1) / 2 ] - current period number) The following applies to the above formula: change per period = (current year's depreciation - next year's depreciation) / 12 / 12 current period number = The position of the current period in the current year of the asset's life. For example, in a fiscal year beginning in January, February is 2.
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