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Depreciation

Darshan Reddy (Article assistant) (210 Points)

30 June 2015

in a company they have changed from WDV to SLM in the year 2010-11 without giving retrospective effect.Due to which opening WDV is not tallying for me when i calculate individual asset wise WDV.wheather i can give effect for change in the currrent year or how to adjust the opening WDV??

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6 Replies

(Guest)

I think yes..u can do so by treating it as prior period items as par AS 5

Darshan Reddy (Article assistant) (210 Points)
Replied 30 June 2015

If it has to treated as prior period income how to account it??

(Guest)

Never done it earlier so plz wait for any other comment before applying this.. M just telling u d treatment that i think to be correct First compute balance on 1.4.2010 as per revised method of dep.with retrospective effect and adjust the amount in profit and loss account .....but in this case dep. so calculated after changing method of dep will be wrong because balance at that date was not revised,so charge the difference between the dep that should have been charged on that revised wdv and dep alrdy charged in profit and loss account.

sriyans Bothra (Article Assistant) (23 Points)
Replied 30 June 2015

What if i dont have the installion date of machinary nd i want to charge dep as per its useful life (Companies act 2013).

What should i consider to charge depreciation??

Darshan Reddy (Article assistant) (210 Points)
Replied 01 July 2015

then you should ask the client to provide the singed balance sheet right from incorporation and take year wise aditions,put some estimated date and calculate remeaning useful life,depreciation..

Yash Choudhary (Trainee) (42 Points)
Replied 01 July 2015

To Sriyans Bothra,

Hello friends,

As we all know Companies Act 2013 has to be implemented from this FY 14-15.

The major change in respect to Asset accounting is, depreciation has to be calculated based on useful life rather than rates of depreciation.

Let’s see examples of possible scenarios

Those who use depreciation rate can calculate useful life by divide 100 by the rate and those who use useful life method already can use the same while seeing the below scenarios.

Asset class	Depreciation rate	Calculated useful life	CO.ACT 2013 Useful life
1	20%	5	5
2	10%	10	5
3	5%	20	30

Scenario 1:

For Asset class 1, useful life is same in old method as well as Companies Act prescribed useful life. So there is no impact in depreciation.

Scenario 2a:

If for some assets in asset class 2 expired useful life is 3, then net book value should be depreciated over remaining useful life of 2 years.

Scenario 2b:

If for some assets in asset class 2 expired useful life is 6 years, then whole net book value should be charged off immediately and has to adjusted in opening retained earnings.

Scenario 3:

For assets in asset class 3, the net book value should be depreciated over remaining useful life.