as per Part “C” of Schedule II of the Companies Act, 2013 after making following assumptions:
- The useful life to compute depreciation of the asset has been taken as per Part C of Schedule II
The residual value of an asset has been taken as 5% of the original cost of the asset
|as per Part “C” of Schedule II of the Companies Act, 2013 after making following assumptions:
1. The useful life to compute depreciation of the asset has been taken as per Part C of Schedule II
2. The residual value of an asset has been taken as 5% of the original cost of the asset
The useful life of an asset shall not be longer than the useful life specified in Part ‘C’ and the residual value of an asset shall not be more than 5% of the original cost of the asset. However, where a company uses a useful life or residual value of the asset which is different from the above limits, justification for the difference shall be disclosed in its financial statement.
- “Factory buildings” does not include offices, godowns, staff quarters.
- Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed.
- The following information shall also be disclosed in the accounts, namely:— (i) depreciation methods used; and (ii) the useful lives of the assets for computing depreciation, if they are different from the life specified in the Schedule.
- Useful life specified in Part C of the Schedule is for whole of the asset. Where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.
- Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Ordinarily, the residual value of an asset is often insignificant but it should generally be not more than 5% of the original cost of the asset.
- The useful lives of assets working on shift basis have been specified in the Schedule based on their single shift working. Except for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C above), if an asset is used for any time during the year for double shift, the depreciation will increase by 50% for that period and in case of the triple shift the depreciation shall be calculated on the basis of 100% for that period.
- From the date this Schedule comes into effect, the carrying amount of the asset as on that date—
- shall be depreciated over the remaining useful life of the asset as per this Schedule;
- after retaining the residual value, shall be recognised in the opening balance of retained earnings where the remaining useful life of an asset is nil.
- “Continuous process plant” means a plant which is required and designed to operate for twenty-four hours a day.
For intangible assets, the provisions of the accounting standards applicable for the time being in force shall apply, except in case of intangible assets (Toll Roads) created under ‘Build, Operate and Transfer’, ‘Build, Own, Operate and Transfer’ or any other form of public private partnership route in case of road projects. Amortisation in such cases may be done as prescribed in para 3(ii) of Part A of Schedule II.