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Depreciation

kinnar shah (Mira Road) (28 Points)

22 August 2012

Hello Everyone,

We are doing an accounting of an event Management company. In 2007-08, the company incured the expenditure on office renovation which was capitalised.but now in 2012-13 the company feels that it should not be capitalised and accordingly it took it in the revenue account (the written down value).My question is since it is treated as the expense will the depreciation entry for previous years have to be reversed for last years???

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2 Replies

CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 22 August 2012

The particular transaction involves changes in AS 1 - Disclosure of accounting policy, AS 6-Depreciation Accounting and AS 10 - Fixed Assets.

As the expenses capitlsed in the FY 2007-08 based on which the financial statements were certified by since then upto FY 2011-12 by following accounting polices consistently.

Coming to your question about reversal of depreciation, when U treated as expenses as revenue then U need to reverse the depreciation for previous years also as there in no fixed asset for particular amount.

At the same time u have to adhere AS 1, 6 and 10.

Vineet (Assistant Manager) (140 Points)
Replied 24 August 2012

Dear Kinaar, The probable solution that I have , you can write off the wdv amount and charged in p & l account by showing that it doesn't have any value for future. In that case no need to have a depreciation entry and passed the write off entry at the beginning of the financial year so there is no need to charge the dep for the current year too.. In that case no need to reverse the dep if they charged off remaining wdv as write off as this solve the problem..