Depreciation policies

Accordin to AS 1, Consistency in accounting policies, is one of the fundamental assumptions. By consistency they mean consistency of accounting policies through time and through out the organisations? isnt it ? If that is true, and we are talking about branches, which are components of an entity, how can there be inconsistency within the entity? As far as the concept holds good, I dont think this is possible, please wait for other responses, to come to a conclusion.

Dear Subramani,

Yes u can  charge depreciation by using different methods[ SLM ON ONE & WDV ON OTHER]on  similar asssts in the same company or its branches/plants. It depends on how theassets is planned to be used by the company,e.g., may be one car is used for only pick & drop of an eXecutive  and other by all the staff for official purposes whenever required. 

1. Since the fiRst car is used  uniformaly it should be depreciated under SLM
2. The second will be used more in initial years and less inlater years ,therfore, appropriate method  wouldbe WDV.  

How an asset will be used can,t be detemined by AS for each company or for that matter for each asset of the company ,instead it is determined by the management ,therfore, it is a matter of Accoounting policy to be decided the management .

This discretion is conferred upon managemet by PARA 12 of AS-6  Para-12 There are several methods of allocating depreciation over the useful life of the assets. Those most commonly employed in industrial and commercial enterprises are the straightline method and the reducing balance method. The management of a business selects the most appropriate method(s) based on various important factors e.g.

 (i) type of asset,

 (ii) The nature of the use of such asset and

(iii) Circumstances prevailing in the business.

 A combination of more than one method is sometimes used.

Thanks for clarifying :)