Methods of depreciation

Straight-line depreciation

Assets depreciate at a constant value per year. The total depreciation equals the purchase price minus the salvage value. To calculate the annual depreciation, the total depreciation is divided by the estimated useful life of the asset.

Declining balance (150%)

Assets depreciate at a constant rate per year, accelerated by a factor of 150%. In this method of accelerated depreciation, 150% of the straight-line depreciation amount is taken the first year. That same percentage is applied to the undepreciated amount in subsequent years.

Double-declining balance (200%)

Assets depreciate at a constant rate per year, accelerated by a factor of 200%. In this method of accelerated depreciation, double the straight-line depreciation amount is taken the first year. That same percentage is applied to the undepreciated amount in subsequent years.

Sum-of-the-year's digits

Assets lose more of their value early in their lifetime. This method of calculating depreciation of an asset assumes higher depreciation charges and greater tax benefits in the early years of an asset's life.
In this method of accelerated depreciation, each year of useful life is assigned a value from the total down to 1. The sum of the years of the useful life of an asset is calculated. For example, for 3 useful years, this sum is 6 (3 + 2 + 1). For each year, the asset is depreciated by the year's value divided by the sum. For example, in the first year, it is depreciated by 3 / 6, which is 50%.