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Depreciation

CS Asmita Mehta (CS) (308 Points)

14 April 2009

Is charging depreciation compulsory as per companies act ?

plz reply with reason.............

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11 Replies

BALASUBRAMANYA B N (CCI STUDENT....) (44668 Points)
Replied 14 April 2009

www.caclubindia.com/forum/message_display.asp

Jitender (Chartered Accountant) (8724 Points)
Replied 14 April 2009

yes, it is compulsory. rates given in co. act are minimum rates

Jyoti Malik (ACCOUNTANT) (2644 Points)
Replied 15 April 2009

Mr. Jitender is right. It is compulsory

CS Asmita Mehta (CS) (308 Points)
Replied 15 April 2009

Rates prescribed in Schedule XIV to the Companies Act, 1956 is not mandatory . But as per section 349 and 350 for the purposes of calculation of managerial remuneration availability of profits for distribution as dividend, the rates prescribed in said schedule shall have to be applied.

But what if we are not distributing dividend and we calculated net profit for managerial remuneration separately then what will be the position.........???

Kamal Jain (FCA) (200 Points)
Replied 16 April 2009

5. The following information should also be disclosed in the accounts:

Please refer to Note no. 5 to Schedule XIV

5. The following information should also be disclosed in the accounts:

(i) depreciation methods used; and

(ii) depreciation rates or the useful lives of the assets, if they are different from the principal rates specified in the Schedule.

Therefore its settled now that rates mentioned in schelue XIV are not mandatory.However a note will suffice if rates used in preparation of financial statements are different from rates mentioned in schedule XIV.

Hope OK.

(Guest)

depreciation is not compulsory for Companies because part ii of schedule vi does not make it compulsory.depreciation is chargeable only in the case of sec 205,349 and 350.

CS Asmita Mehta (CS) (308 Points)
Replied 16 April 2009

If we don’t charge depreciation it means we are not following AS-6 and as per section 211 every company should comply with accounting standards and if its not complying than deviations and reasons should be disclosed.

As per pera-4 of companies accounting standard rules, 2006

4. Obligation to comply with the Accounting Standards.- (1) Every company and its auditor(s) shall comply with the Accounting Standards in the manner specified in Annexure to these rules.

(2) The Accounting Standards shall be applied in the preparation of General Purpose Financial Statements.

Doesn't it means charging depreciation is copulsory.............??????????????

(Guest)

If you go through AS 6 you will not get any word that says depreciation is compulsory rather you will get AS 6 is mandatory if you charge depreciation.

AS 6 sets the broad principle for computing depreciation without prescribing any specific method or rate.

during my article I audited a company whose production was closed and they were not charging depreciation.But in this case company must give a notes to the account that depreciation is not chareged and must give the state there off.

(Guest)

Originally posted by :nikita
"	Is charging depreciation compulsory as per companies act ? plz reply with reason.............	"

If you go through AS 6 you will not get any word that says depreciation is compulsory rather you will get AS 6 is mandatory if you charge depreciation.

AS 6 sets the broad principle for computing depreciation without prescribing any specific method or rate.

M. R. VAKALIYA (Accountant) (67 Points)
Replied 11 June 2009

can u pls tell me the Depreciation methods which particular method company should use.

Muntasir

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 12 June 2009

Dear Nikita,

You asked as under:-

But what if we are not distributing dividend and we calculated net profit for managerial remuneration separately then what will be the position.........???

Yes, dividend is required to be deducted to arriave at net profit.