Companies act

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MAKARAND DAMLE (Querist)
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10 October 2016 The new provisions of calculation of depreciation came into effect for preparing final accounts of 14-15
My question is if any company has not followed the new rules of depreciation and calculated depreciation as was done as per Companies Act, 1956 what remedial measures can be taken in 15-16 ?

MAKARAND DAMLE

MAKARAND DAMLE (Querist)
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12 October 2016 can some expert answer ?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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19 July 2024 If a company has not followed the new provisions for depreciation as per the Companies Act, 2013 for the financial year 2014-15 and instead continued to use the depreciation methods prescribed under the Companies Act, 1956, there are remedial measures that can be taken in subsequent financial years, such as 2015-16. Here’s what can be done:

1. **Correction in Financial Statements (15-16):**
- In the financial statements for the year 2015-16, the company should rectify the depreciation calculation to comply with the provisions of the Companies Act, 2013.
- Calculate depreciation for the year 2015-16 as per the new rules under the Companies Act, 2013. This may involve revising the method of depreciation (straight-line method, written down value method, etc.) and rates prescribed under Schedule II of the Act.

2. **Adjustment in Profit and Loss Account:**
- Any adjustment arising from the correction should be reflected in the profit and loss account of 2015-16.
- The corrected amount of depreciation should be charged against profits for the year 2015-16 to ensure compliance with the statutory requirements.

3. **Impact on Balance Sheet:**
- Update the fixed assets’ values in the balance sheet as per the revised depreciation calculations.
- Ensure that the carrying amount of fixed assets and accumulated depreciation reflect the correct values as per the Companies Act, 2013.

4. **Disclosure and Notes to Accounts:**
- Provide adequate disclosure in the notes to accounts explaining the change in accounting policy related to depreciation.
- Disclose the impact of the change on the financial statements, including comparative figures for the previous year adjusted for the correction.

5. **Compliance and Documentation:**
- Ensure compliance with all regulatory requirements related to the change in accounting policy.
- Maintain proper documentation supporting the revision in depreciation calculations and its impact on financial statements.

6. **Auditor’s Opinion:**
- Obtain the auditor’s opinion on the revised financial statements for the year 2015-16, acknowledging the change in accounting policy for depreciation.

By taking these remedial measures in the financial statements for 2015-16, the company can rectify any non-compliance with the Companies Act, 2013 regarding depreciation calculation. It’s important to ensure that all adjustments are correctly implemented and disclosed to maintain transparency and compliance with statutory requirements.

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