Mandatory to charge depreciation under companies act

Dear, It is mandatory under the AS 6 to charge depreciation on fixed assets. Accounting standards are notified under the Companies Accounting Rules 2006 section 211 (3C) and therefore it is mandatory under the companies act. As per AS 6, depreciation is due to efflux of time as well and therefore even if assset is not in use, depreciation is mandatory. Incase assets are held for sale and then assets are accounted lower of cost or NRV, whicever is lower.

Hope it clarifies.

Dear Ritesh

I do not think it is mandatory to charge depreciation under Companies act unless:

1. U want to pay dividends or

2. u want to pay managerial remuneration u/s 349/350

However, the non charging of depreciation will attract a qualification in the audit report on account of

A. Non compliance with Applicable Accounting Standards and possibly

B. non maintanence of Proper books of accounts.

If you are ok with above, you can refrain from charigng depreciation this year or even the next. But remember that the year in which u want to declare dividend or pay managerial remuneration u have to charge depreciation including all arrears of previosu years in that year.

The views expressed by Rajagopalakrishnan are agreed upon.

Charging of depreciation is mandatory when the company runs in normal course of business but when the company is not fulfilling the criteria of going concern then this will attract a qualification in the Auditor`s report regarding non compliance of AS 10 or other relevant Ind AS as well as SAs.If the original life of assets are revised as per technical evaluation then carrying amount should be derecognised.