If a company is following WDV method of accounting for Depreciation , and as per the policy of Company it does not assume any residual value for any assets.
Then as per �the formula given in the Guidance note on Application to Schedule II of ICAI i.e
Rate for Depreciation=(1-((scrap/Cost/wdv)^(1/Remaining Life)))*100
Then if we put Scrap Value Zero the �rate will always come 100%�
So whether Company should write off all its assets in the very first year
or it is mandatory to assume a residual value for each assets under Companies Act 2013.
Replies (4)
Guest
U can assume some nominal value as residual value like 10, 100 etc.
Without assuming residual value, assets will not be depreciated over its useful life.
Other option could be tht change the method of depreciation frm wdv to slm method with retrospective effect.then in this case,u dnt need to assume any residual value
I tried notinal value also but still rate comes between 95-98% , which is resulting in very high depreciation in the first year specially for those which are existing as on 01-4-14
Guest
yeah u r ryt..it will happen.thats y i told u another option is to shift from wdv method to slm method
when useful life of asset is short and residual value is almost nil then in such a case as per wdv rate , dep. in initial year will be high.
In case of WDV depn.as per companies act 2013, after charging depn.for 14-15, if WDV becomes more than SV, what needs to be done? Pls clarify. Thank u.
CAclubindia
