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# sum of the digits

A method of *allocating costs to time periods based on the formula n (n + 1) / 2, where n represents the number of years to which the cost is to be allocated. In *amortization methodologies, the sum of the digits approach results in an *accelerated method that amortizes the cost of a *long-term asset more heavily in the early years of its *useful economic life. For example, for an asset with a useful economic life of 5 years, the sum of the digits is 15, which is calculated as 5 (5 + 1) / 2. In the first year, the cost of the asset is amortized by 5/15, in the second year by 4/15, and so on, until the final year’s amortization of 1/15.

Auditor's dictionary. 2014.

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