Depreciation issues

Statutory Audit 985 views 3 replies

Badrinath

XYZ

41 Points Posted on 16 July 2011

Change in the method of deprication : During the year the co. has changed the method of depreciation from SLM to WDV as per AS 6 co. has recomputed the depreciation and wants to charge the shotfall of deprecation to the P&L account . In this regard the following issues are to be addressed

Presentation in the profit and loss account as a seperate line item or not ?
Presentation in significant accounting polices and notes to accounts?
Taxation impact on account of shortfall of depreciation as per section 32 as per the IT ACT ?
Taxation impact on account of shortfall of depreciation as per section 115 JB of the IT ACT?
Any Qualification or emphasis on the matter required in this regard in the auditors report ?

Replies (3)

CA Rajesh Keshri

175 Points Posted on 16 July 2011

Change in method of depreciation as per AS 6 is well recognised & depreciation should be retrospectively charged to p&l a/c

saurav somani

Article

21 Points Posted on 17 July 2011

As per AS-6, a change in method of depreciation is treated as a change in an accounting policy and hence the disclosure requirement will be in accordance with AS-5.

Now, as per AS 5, if the change in A/c policy has a material effect on the financial statements, then it should be disclosed. Also as per AS-1, such change in A/c policy requires disclosure in the notes to accounts in one place. Please refer AS-1, AS-6, AS-5 and Standards on Auditing-700 for gaining detailed insights in to your question.

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85935 Points Posted on 17 July 2011

Originally posted by : saurav somani
	As per AS-6, a change in method of depreciation is treated as a change in an accounting policy and hence the disclosure requirement will be in accordance with AS-5. Now, as per AS 5, if the change in A/c policy has a material effect on the financial statements, then it should be disclosed. Also as per AS-1, such change in A/c policy requires disclosure in the notes to accounts in one place. Please refer AS-1, AS-6, AS-5 and Standards on Auditing-700 for gaining detailed insights in to your question.