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Depreciation

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Abhishek Selvam O

258 Points Posted on 11 August 2020

Machine purchase on 1/4/2016
for 100000 dep at 10 percent now in 2019 it is valued at 70000 in 2019 nov rs.50000 incurred to improve now for this computer should I depreciate for 70000 or 120000 or separately should I show deprecitaion for both

Replies (3)

Quick Summary

This discussion clarifies how to handle depreciation when an asset has been improved. Additions made after initial use should be depreciated over the remaining useful life of the asset. For tax purposes, if the asset was used for less than 180 days in the financial year, depreciation might be at half the usual rate. In accounting, you can combine the values for depreciation calculation, but present them grouped under the same asset head in financial statements.

bsai partish

120 Points Posted on 11 August 2020

Any additions made to a particular item of plant, properties, equipment after it is intially put to use are depreciated over the remaining useful like of the asset.so 120000 should be depreciated.

Sagar Patel

Tax and Business Consultant

5533 Points Posted on 11 August 2020

As per Income tax Act, 1961 you can claim depreciation at the half the rate of depreciation if you used that assets for Less than 180 days.
So, in your case as you purchased assets in Nov,2019, You have to charge depreciation @ 10% on 70,000/- and 5% on 50,000/-

In books of account you can combine the value of both and charge depreciation thereon.

Manzil Arora

Others

780 Points Posted on 12 August 2020

Hi Abhishek

As per Ind AS 16, an addition to asset shall be added with the old PPE if it's increasing value in operations of business. And, the life of the asset shall be defined on the basis of nature of asset. For instance, a machine life is for 15 years and a motor is added having life of 5 years. Thus, depreciation will be calculated accordingly on machine and motor separately.

Now, in depreciation working / calculation you can show both the assets separately, but on face of financials, you have to group these assets under same head.