Arka Bose (None) (313 Points)
11 November 2011
Suppose X Ltd bought a machinery for 400 lacs and after 3 years of purchase,govt decided to give a subsidy of 150 lacs.
Now,we know depreciation on this asset should have been on 400-150=250 lacs.
But,what would the company do in these 3 years? How will it claim depreciation in these years and also in the current year.
ACCOUNTANT
(Student)
(559 Points)
Replied 11 November 2011
Probably the depreciation already claimed would be reversed to the extent not permittable.......after 3 yrs....
Gaurav Khatter
(Chartered Accountant)
(58 Points)
Replied 11 November 2011
According to me, During first 3 years depreciation should be charged as usual on Rs. 400 lacs and when subsidy of Rs. 150 lacs has been after 3 years, it can be booked as deffered income in the liabilities side of the balance sheet and then it should transfered to Profit and Loss a/c as income in proportion to depreciation.
thanks and regards,
Prashanth
(Chartered Accountant)
(2322 Points)
Replied 12 November 2011
@ Arka the depreciation which already you have provided dont make any changes(i.e.in the last years) and from now the new Depreciation will be
Book value of the asset Minus (-) Subsidy received /Remaining life of the asset
CA Goutam Sharma
(Chartered Accountant in Practice)
(468 Points)
Replied 12 November 2011
Phalgun
(Audit Manager)
(327 Points)
Replied 12 November 2011
Probable case 1 - Depreciation for three years computed will be computed as a normal act. For the balance depreciation is computed after deducting subsidy
Case 2 - Depreciation may be recomputed after disallowing the allowed depreciation but deducting subsidy.
ACCOUNTANT
(Student)
(559 Points)
Replied 12 November 2011
But even what is said.......results ultimately in the same manner........except that i gave my answer more with a/c point of view......
CA sachin c chavan
(proprietor)
(26 Points)
Replied 13 November 2011
As per As 10 on "Accounting for Fixed Assets" depreciation charged in the previous years can not be reversed. Similarly , as per AS 6 on "Depreciation Accounting", if there is change in depreciable amount due to change in Historical Cost ,effect of the same should be given prospectively. In this case there is change in the historical cost of FA due to receipt of govt subsidy. Hence remaining unamortised amount should be written off over remaining useful life. i agree with Prashant.
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