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PART ‘B’
4. The useful life or residual value of any
specific asset, as notified for accounting
purposes by a Regulatory Authority
constituted under an Act of Parliament or by
the Central Government shall be applied in
calculating the depreciation to be provided
for such asset irrespective of the
requirements of this Schedule.
Part 'C'
Depreciation (Contd.)
• Componentization of assets mandated
Separate capitalization and depreciation of a
part of an asset if its cost is significant to the
total cost of the asset and its estimated life is
different from the remaining asset
• Accounting for replacement costs.
• Significant increase in rate of depreciation of
commonly used assets as compared to
Schedule XIV rates under the 1956 Act
Nature of asset - The Companies
illustrative Act, 2013 The
%
Deem Compani Increas
Useful change
ed es Act, e
Life
rate 1956
General Plant and
Machinery other than
continuous process plant 15 6.33% 4.75% 1.58% 33.33%
11.88 124.91
Continuous process plant 8 % 5.28% 6.60% %
General furniture and
fittings 10 9.50% 6.33% 3.17% 50.08%
19.00 300.00
Office equipment 5 % 4.75% 14.25% %
31.67
Desktops, laptops,
• Depreciable etc.
amount to be3 determined
% after
16.21% 15.46%expected
reducing 95.35%
Electrical
residualInstallations
value and 100.00
Equipment 10 9.50% 4.75% 4.75% %
• Residual value generally not more than 5% of the original cost of
the asset
Depreciation :
Depreciation on tangible fixed assets based on
estimated useful life
From a Rates regime to Useful Lives
Useful life of an asset is the period over
which the asset is expected to be
available for use by the entity or the
number of production or similar units
expected to be obtained from the asset
Notes —
1. "Factory buildings" does not include offices, godowns, staff
quarters.
2. Where, during any financial year, any addition has been
made to any asset, or where any asset has been sold,
discarded, demolished or destroyed, the depreciation on
such assets shall be calculated on a pro rata basis from the
date of such addition or, as the case may be, up to the
date on which such asset has been sold, discarded,
demolished or destroyed.
3. The following information shall also be disclosed in the
accounts, namely:—
(i) depreciation methods used; and
(ii) the useful lives of the assets for computing
depreciation, if they are different from the life specified in
the Schedule.
4. Useful life specified in Part C of the Schedule is for whole
of the asset. Where cost of a part of the asset is significant
to total cost of the asset and useful life of that part is
different from the useful life of the remaining asset, useful
Notes (contd.)—
5. Depreciable amount is the cost of an asset, or
other amount substituted for cost, less its residual
value. Ordinarily, the residual value of an asset is
often insignificant but it should generally be not
more than 5% of the original cost of the asset.
6. The useful lives of assets working on shift basis
have been specified in the Schedule based on their
single shift working. Except for assets in respect of
which no extra shift depreciation is permitted
(indicated by NESD in Part C above), if an asset is
used for any time during the year for double shift,
the depreciation will increase by 50% for that
period and in case of the triple shift the
depreciation shall be calculated on the basis of
100% for that period.
Notes (contd.) —
7. From the date this Schedule comes into
effect, the carrying amount of the asset as on
that date—
(a) shall be depreciated over the remaining
useful life of the asset as per this Schedule;
(b) after retaining the residual value, shall be
recognised in the opening balance of
retained earnings where the remaining useful
life of an asset is nil.
8. ‘‘Continuous process plant’’ means a plant
which is required and designed to operate for
twenty-four hours a day.
CA 1956 had Schedule XIV wherein SLM Rates
and WDV rates were prescribed for different class
of assets and companies had an option to
provide depreciation and any of these rates.
Now CA 2013 has provided that depreciation has
to be provided as per Schedule II of the Act
wherein useful life of different class of assets
have been provided and depreciation has to be
provided accordingly till 95% of the value of asset
is written of.
Does this mean that depreciation has to be
written off according to SLM only or still the
companies have option to provide depreciation
based upon other methods ?
THANK YOU