Notes for change in depreciation method
This query is : Resolved
06 October 2013
Suppose earlier depreciation is Rs.20000 and profit is Rs.100000. Now after change of method of depreciation, depreciation is Rs.25000 and profit is Rs.95000. How to write notes for change in method of depreciation.
06 October 2013
for example : "Depreciation in respect of extra or multiple shift
allowance amounting to rupees ............. has not
been provided which is contrary to the provisions
of Schedule XIV to the Companies Act. This has
resulted in the profit being overstated by
Rs ............... and plant and machinery
overstated by Rs .............."
allowance amounting to rupees ............. has not
been provided which is contrary to the provisions
of Schedule XIV to the Companies Act. This has
resulted in the profit being overstated by
Rs ............... and plant and machinery
overstated by Rs .............."
CA Pallav Singhania
(Expert)
06 October 2013
Effective ....Date the Company changed its method of computing depreciation from WDV methods to the straight-line method for the Company's Long Term assets.
Based on Statement of Financial Accounting Standards ,
the Company determined that the change in depreciation method from WDV method to a straight-line method is a change in accounting estimate affected by a change in accounting principle. A change in accounting estimate affected by a change in accounting principle is to be applied prospectively. The change is considered preferable because the straight-line method will more accurately reflect the pattern of usage and the expected benefits of such assets and provide greater consistency with the depreciation methods used by other companies in the Company's industry.
The net book value of assets acquired prior to ....Date with useful lives remaining will be depreciated using the straight-line method prospectively.
As a result of the change to the straight-line method of depreciating Long term Asset assets, depreciation expense increased by 5000 rupees for the said month period ended March 31,XXX and the decrease in Profit by 5000.
regards,
Based on Statement of Financial Accounting Standards ,
the Company determined that the change in depreciation method from WDV method to a straight-line method is a change in accounting estimate affected by a change in accounting principle. A change in accounting estimate affected by a change in accounting principle is to be applied prospectively. The change is considered preferable because the straight-line method will more accurately reflect the pattern of usage and the expected benefits of such assets and provide greater consistency with the depreciation methods used by other companies in the Company's industry.
The net book value of assets acquired prior to ....Date with useful lives remaining will be depreciated using the straight-line method prospectively.
As a result of the change to the straight-line method of depreciating Long term Asset assets, depreciation expense increased by 5000 rupees for the said month period ended March 31,XXX and the decrease in Profit by 5000.
regards,
Message likes :
2 times
07 October 2013
Well drafted by Mr.Aryan. However, the effect on the 'Reserves and Surplus' also to be mentioned in the notes, though he has covered the effects on assets and profit.
Message likes :
1 times
07 October 2013
Completely Agree with Aryanji
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