26 February 2015
Depreciation rates are changed now because of Companies Act 2013.My question is whether we should go for retrospective re-computation of depreciation from the date of assets put to use.Thanks in advance.
26 February 2015
Rule 7(b) states that after retaining the residual value , shall be recognized in the opening balance of retained earning where the remaining useful life of an asset is Nil However Accounting Standard – 6 States When such a change in the method of depreciation is made, depreciation is recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective recomputation of depreciation in accordance with the new method is adjusted in the accounts in the year in which the method of depreciation is changed. In case the change in the method results in deficiency in depreciation in respect of past years, the deficiency is charged in the statement of profit and loss. In case the change in the method results in surplus, the surplus is credited to the statement of profit and loss. Such a change is treated as a change in accounting policy and its effect is quantified and disclosed. Initially Rule 7(b) and Accounting Standard 6 is in conflict with each other but Rule 7 (b) has been changed by notification dated 29.08.2014 which states that ) states that after retaining the residual value , may be recognized in the opening balance of retained earning where the remaining useful life of an asset is Nil Shall replaced by the word may , Perhaps to keep it in line with AS-6 As Accounting Standard -6 is mandatory keeping in mind , impact on depreciation of change in method will be taken in current year Profit & Loss account with proper disclosure , nothing will be transferred to reserve therefore no entry for this - See more at: http://taxguru.in/company-law/depreciation-companies-act-2013-practical-approach.html#sthash.UDvjSvcc.dpuf
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