Beruflich Dokumente
Kultur Dokumente
V Anjan Panda
IIPM Kolkata
V Accountingstandard (AS) 6, depreciation
accounting was issued by the Institute of
Chartered Accountants of India (ICAI) in 1985
& in the companies act in 1988.
V repreciationis a measure of the wearing
out, consumption or other loss of value of a
depreciable asset arising from use, effluxion
of time or obsolescence through technology
& market changes
V Assets which are used during more than one
accounting period.
Total Rs. 6,500 Rs. 600 Rs. 5,900 4.5 Rs. 1,300
V On 1.04.2001, ABC Ltd. Purchased plant and
machinery worth Rs. 20,00,000 useful life
being 8 years. Till the year ended 31.3.2004,
the amount of accumulated depreciation on
this plant and machinery was Rs. 8,00,000.
The remaining useful life of the plant and
machinery was reviewed during 2004-05,
which was estimated at 2 years due to wear
and tear. Calculate the amount of
depreciation to be charged from the year
2004-05 onwards.
V As per para 22 of AS-6 the useful life of a depreciable
asset should be estimated after considering the
following factors like expected physical wear and
tear, obsolescence, legal or other limits on the use of
the asset.
V As per para 23 of AS-6 the useful lives of the major
depreciable assets or classes of depreciable assets
may be reviewed periodically. Where there is a
revision of the estimated useful life of an asset, the
depreciable amount should be charged over the
revised remaining useful life.
V Here, in this case, the depreciable amount is Rs.
(20,00,000-8,00,000) = Rs. 12,00,000 and the revised
remaining useful life is 2 years. Therefore, the
amount of depreciation to be charged from the year
2004-05 onwards is Rs. 12,00,000/2 = Rs. 6,00,000
p.a.
V On1.04. 2003, the value of X Limited·s plant
and machinery was Rs. 1,000 lakhs. The
company provided depreciation @ 15% p.a.
under Reducing Balance Method. It was found
that about Rs. 150 lakhs of imported asset,
which is the component of plant and
machinery acquired on 1.4.2003, would be
obsolete in 3 years. Accordingly, X Limited
wants to write off this asset over 3 years.
Can the company do so as per AS-6?
V As per para 24 of AS-6, any addition or extension
which becomes an integral part of the existing
asset should be depreciated over the remaining
useful life of that asset. The depreciation on
such addition or extension may also be provided
at the rate applied to the existing asset. Where
an addition or extension retains a separate
identity and is capable of being used after the
existing asset is disposed of, depreciation should
be provided independently on the basis of an
estimate of its own useful life.
V Therefore, in this case, the company can write
off the asset in 3 years, since the asset has
independent useful life.
V the historical cost or other amount
substituted for historical cost of each class of
depreciable assets;
V total depreciation for the period for each
class of assets;
V the related accumulated depreciation;
V depreciation methods used;
V depreciation rates or the useful lives of the
assets, if they are different from the
principal rates specified in the statute
governing the enterprise.
V Mac Hotels Pvt. Ltd.