Which depreciation method calculates depreciation based on years remaining and the sum of the years?

The sum-of-the-years' digits method calculates depreciation based on the sum of the years remaining in an asset's useful life. This method allocates a larger portion of the asset's cost to the earlier years of its life and less to the later years. The calculation involves determining the sum of the digits of the years of the asset’s estimated useful life. For instance, if an asset has a useful life of five years, the sum of the years is 1+2+3+4+5, which equals 15. Each year’s depreciation expense is then calculated based on the fraction of the remaining life over the sum of the years.

This method is particularly useful for assets that may lose value more quickly in earlier years. It reflects the pattern of asset consumption better than methods like straight-line, which spreads the cost evenly over the useful life. The double-declining method accelerates depreciation but does not rely on the years remaining. Units of production bases depreciation on usage rather than the passage of time, and straight-line allocates cost equally over time. Therefore, the sum-of-the-years' digits method is uniquely distinguished by its calculation based on the remaining years and their respective fractions relative to the total sum.