Change in accounting policy
This query is : Resolved
05 February 2013
If company claiming depreciation on single shift basis on plant & machinery from the inception of the company. However, P & M is designed to work for continuous process. P & M is depreciated for single shift for 5 years as it is working under production capacity ( around 40% to 50%)
Now, company after 5 years, wants to change depreciation rates for P & M from single shift to continuous process as achieved nearly 80% production capacity.
whether any retrospective depreciation impact is required to be given in p & l A/c or merely disclosure with quantification in notes to account is sufficient?? Further, it would be treated as change in accounting policy or change in estimation??
Now, company after 5 years, wants to change depreciation rates for P & M from single shift to continuous process as achieved nearly 80% production capacity.
whether any retrospective depreciation impact is required to be given in p & l A/c or merely disclosure with quantification in notes to account is sufficient?? Further, it would be treated as change in accounting policy or change in estimation??
Amit Ashok Chawla
(Expert)
06 February 2013
Depreciation is a charge on useful life of the asset. Any change in the depreciation method is a change in estimate only and has to be done on a prospective basis.
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