Depreciation

www.caclubindia.com/forum/message_display.asp

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

Mr. Jitender is right. It is compulsory

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.........???

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.

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.

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.

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.

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

Muntasir

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.