Depreciation

AS 4370 views 4 replies

Hi all,

if the company changes the rates of depreciation e.g. from 10% to 20% , can the changes of rate of depreciation is treated as an change of method of depreciation as per As -6. If not, what is the treatment of change of rate of depreciation in the books of accounts.

Replies (4)
change in rate is not change in method of depreciation. but u have to look sch VI which permit to provide depreciation at that rate.
because for depreciation, sch VI is imporatant in case of comapany, otherwise as per IT Act is applicable in general practice.
Hi, I am totally agreed with mukesh that change in rate is not change in method of depreciation as well as other thing which he said.A change from one method of providing depreciation to another is made is possible only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise. When such a change in the method of depreciation is made, depreciation is recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective recomputation of depreciation in accordance with the new method is adjusted in the accounts in the year in which the method of depreciation is changed. In case the change in the method results in deficiency in depreciation in respect of past years, the deficiency is charged in the statement of profit and loss. In case the change in the method results in surplus, the surplus is credited to the statement of profit and loss. Such a change is treated as a change in accounting policy and its effect is quantified and disclosed.
Change in rate of depreciation is a change in estimate and not a change in accounting policy. The effects of change in accounting estimate is to be given prospectively i.e. the wdv has to be written off over the remaining life of the asset. If you change rate from 10% to 20%, the remaining value of asset must be depreciated at the rate of 20%.

anand b is totally right


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