Dep issue

I have a query relating to dep which i am unable to solve so thought you could help me on that.

query goes like this- We have concept of writing off assets valuing less than 5000rs.

Suppose we have a building that costs Rs 6000 and we provide WDV on that. Now we have constructed one more room in that building which costed us rs 4000. So, we add this 40000 to 60000 and treat building as rs.10000.

IFRS has the concept of componentization ie each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. Now my ques is, if any indian company is applying IFRS how will they deal with this? Will they write off room cost of Rs4000 treating room and building separately as per IFRS or they will treat building and room as one as charge normal dep on Rs10000.

Also, is concept of writing off assets less than rs5000 there in IFRS?

Thanks in advance, Pavitra

Hi Pavitra,

Under IFRS, there is no concept of writte off assets whose cost is less than Rs, 5000. However in practical scenario one can still continue the existing accounting under IGAAP considering the impact will not be material or substantiating that the useful life of such assets is one year only.

Component accounting is based on principle that fixed assets (PPE) is often composed of various component with varying useful life and these parts are replaced during the useful life of the fixed assets.and therefore IFRS requires that all such significant components with different useful lives should be recognised and depreciated seperately. In the given case it seems that the useful life of the room will be same as remaining useful life of the building and hence it may not be required to be recognised as seperate.

Further it is important to note that under Ind AS, one can adopt the previous GAAP number on transition to Ind AS by taking optional exemption of deemed cost under Ind AS 101.

Hope above discussion will be helpful for you to evaluate and conclude.

Regards,

Mayur