practical aspects related to depreciation scheduleii companies act, 2013
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT, 2013Date: 13th August, 2015
Time: 4:00 PM to 6:00 PMVenue: Hotel Taj, Sector-17A,
Chandigarh
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Organizers- Young Members Empowerment
Committee of ICAI and Chandigarh Branch of NIRC -ICAI
CHALLENGESunder CA 2013
Deciding about Residual Value of Existing Asset
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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Prescribed Class of Companies –To follow
AS approved by NFRA – no such
categorization till now S133
Companies regulated by Regulatory Authority – as
notified by regulatory authority
For other Companies – As per Schedule II
Part C
Categorization – for Applicability
CHALLENGESunder CA 2013
Computation of depreciation in case
of Double / Triple shift
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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CHALLENGESunder CA 2013
Finding Current Value of existing
Asset (in case fixed asset records
available)
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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CHALLENGESunder CA 2013
Finding Current Value of existing Asset
(in case fixed asset records are not available…)
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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CHALLENGESunder CA 2013
Which one to Supersede in case of
Contradiction b/w AS-6 &
Schedule II
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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CHALLENGESunder CA 2013
Impact of 29th August Notification
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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CHALLENGESunder CA 2013
Applicability of Schedule II
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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CHALLENGESunder CA 2013
Finding Rate of Depreciation in
case of WDV Method
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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Schedule II effective from
1st April, 2014Notification
S.O.902(E)dated 26th March, 2013
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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NOTIFICATION
SCHEDULE IIPART A
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•Systematic allocation of depreciable amount of an assetDEPRECIATION
•Period over which an asset to be available for use
USEFUL LIFE
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Schedule IIPart B
Regulatory Authority / CG Precede over Schedule II
Useful life or Residual Value
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Basis of Depreciation
Useful Life
Part ‘C’ Schedule II
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Assets are classified into 15 Heads and multiple sub-
heads
Part ‘C’ Schedule II
Depreciation Methods
Written Down Method
Straight Line Method
VOLUNTARY
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Notification No. GSR 627 (E) [F.NO.A17/60/2012-CL-V] dated29th August, 2014
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
DepreciationS 123(2) Sch . II
Concept of Residual ValueConcept of Useful Life Depreciation includes Amortization
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
CA 1956
Depreciation on the basis of Percentage
No Scrap Value Concept
Rates were prescribed for Intangible assets also
Concept of Componentization
Depreciation to be increased based on double shift(50%)Triple shift(100%) of an asset
No separate rate for Double/Triple Shift
No Concept of Component Accounting
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
BenefitsOf
New Provisi
ons
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
PART 3 of PART A Of SCHEDULE II
Residual value shall not be more
than 5% of the original cost of the
asset. Team AGBians
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
POINT TO REMEMBER..!!
To adopt different useful life
than the Schedule II
One needs to provide justification
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
POINT TO REMEMBER..!!
To adopt higher residual value
>5%
One needs to provide
justification Team AGBians
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
WHY DIFFERENT USEFUL LIFE ?????
Quality of Assets
Customized Assets
Superior / Inferior Technology
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
PARA 4 Under Part C of Schedule II
Significant part to the Total Cost
The part
should have different useful life than the main asset
COMPONENTACCOUNTING
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Voluntary
•F.Y 2014-2015
Mandatory
• F.Y 2015-2016 and thereafter
Applicability of Component Accounting- Notification dated 29th August, 2014
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
POINT TO REMEMBER:- COMPONENTIZATION
AS-10 • Accounting Standards for Fixed Assets
AS-16 • Accounting Standards for
Property, Plant and Equipment
NOT MANDATORY
MANDATORY
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Part 7 in part C NIL
Net Carrying amount after Remaining Residual Value
Debit-Opening Retained Earnings
EXIST
Shall be depreciated over the useful life of the asset.
Debit-Profit & Loss a/c
Remaining Useful life of an asset as per CA, 2013 as on 01/04/2014
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013When Depreciation on pro rata Basis ??•Addition made to any assets •When asset has been-
SoldDiscardedDemolishedDestroyed
AS-26 Intangible Asset
Amortization means Depreciation in the value of Intangible
asset (except toll roads)
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Rate of Amortization- Amount of Amortization *100 Cost of Intangible asset
Amount of Amortization- Actual revenue for the year *100
Projected Revenue from the Intangible asset
AMORTIZATION CALCULATIONFor toll roads (under PPP Model)
Is all Intangible assets governed
by AS-26 ??
Toll Roads created under Built operate
and transfer or under any other PPP model
Exception
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
Does the Intangible asset has finite life ???
YESAmortize
the intangible
asset
NONo
Amortization of
intangible asset
Determination of Intangible Asset
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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,
2013
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Ajay Garg Team AGBians
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