Tuesday, 8 September 2015

Depreciation under Schedule II of Companies Act 2013



I analyzed schedule II of Companies Act 2013 along with guidance note issued by ICAI for depreciation and in my opinion understated points are need to be considered for the purpose of calculation of depreciation for the financial year 2014-15:

1. If useful life of an asset has been taken under Schedule VI of Companies Act, 1956 more than the life is prescribed under Schedule II of Companies Act, 2013 and
• Life has been expired as on 30.03.15 as per schedule II then WDV should be written off as on 31.03.15.
• Life is remained unexpired as on 31.03.2015 as per schedule II then balance WDV should be written off in remaining year of the assets.

Example:
Life Under
Purchased Old Act New Act Treatment as on 31.03.15
2003-04 15 Year 10 Year WDV as on 31.3.14 to be Written off as on 31.03.15
2003-04 20 Year 15 Year WDV as on 31.3.14 to be Written off over next 5 Year

2. Calculation of revised depreciation from acquisition of assets as on 31.03.14 and then adjust the difference of revised and original depreciation in profit & loss account is to be done only is case of change in method of depreciation. As companies is following WDV method of accounting and wants to shift from WDV to SLM then above calculation needs to be made otherwise Rate of WDV to be revised to write off the assets in remaining useful life.

3. A new concept of component accounting has been introduced which is option for the year 2014-15 and mandatory from 1.04.15. According to this, an asset is to be divided to the component to the extent possible and provide depreciation component wise.

4. For shift uses depreciation calculated as per new provisions to be increased by 50%, in case of double shift and by 100%, in case of triple shift.

By Prabhash Choudhary

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