{"id":179,"date":"2015-07-10T10:57:27","date_gmt":"2015-07-10T10:57:27","guid":{"rendered":"http:\/\/carajput.com\/blog\/?p=179"},"modified":"2021-11-18T17:45:25","modified_gmt":"2021-11-18T12:15:25","slug":"all-about-depreciation-key-changes-in-the-schedule-ii-to-the-companies-act-2103","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/all-about-depreciation-key-changes-in-the-schedule-ii-to-the-companies-act-2103\/","title":{"rendered":"CORPORATE AND PROFESSIONAL UPDATE JULY 10, 2015"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f5b019448b9\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f5b019448b9\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/all-about-depreciation-key-changes-in-the-schedule-ii-to-the-companies-act-2103\/#CORPORATE_AND_PROFESSIONAL_UPDATE_JULY_10_2015\" title=\"CORPORATE AND PROFESSIONAL UPDATE JULY 10, 2015\">CORPORATE AND PROFESSIONAL UPDATE JULY 10, 2015<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/all-about-depreciation-key-changes-in-the-schedule-ii-to-the-companies-act-2103\/#All_about_Depreciation_Key_changes_in_the_Schedule_II_to_the_Companies_Act_2103\" title=\"All about Depreciation &amp;Key changes in the Schedule II to the\u00a0Companies Act, 2103\">All about Depreciation &amp;Key changes in the Schedule II to the\u00a0Companies Act, 2103<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/all-about-depreciation-key-changes-in-the-schedule-ii-to-the-companies-act-2103\/#Key_changes_in_the_Schedule_II_to_the_Companies_Act_2103_as_compared_to_Schedule_XIV_to_the_Companies_Act_1956\" title=\"Key changes in the Schedule II to the\u00a0Companies Act, 2103 as compared to Schedule XIV to the Companies Act, 1956:-\">Key changes in the Schedule II to the\u00a0Companies Act, 2103 as compared to Schedule XIV to the Companies Act, 1956:-<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><\/h2>\n<h3 style=\"text-align: justify;\"><\/h3>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled6.png\" rel=\"attachment wp-att-1723\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-1723\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled6-300x190.png\" alt=\"Untitled6\" width=\"962\" height=\"609\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled6-300x190.png 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2015\/11\/Untitled6.png 623w\" sizes=\"(max-width: 962px) 100vw, 962px\" \/><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"CORPORATE_AND_PROFESSIONAL_UPDATE_JULY_10_2015\"><\/span>CORPORATE AND PROFESSIONAL UPDATE JULY 10, 2015<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"All_about_Depreciation_Key_changes_in_the_Schedule_II_to_the_Companies_Act_2103\"><\/span><span style=\"color: #808000;\"><strong>All about Depreciation &amp;Key changes in the Schedule II to the\u00a0Companies Act, 2103<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p style=\"text-align: justify;\">Depreciation is systematic allocation of the depreciable amount of an asset over its useful life.<\/p>\n<p style=\"text-align: justify;\">The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value<strong>.\u00a0<\/strong><\/p>\n<p style=\"text-align: justify;\">Useful life is the period over which an asset is expected to be available\u00a0for use by an entity, or the number of production or similar units\u00a0expected to be obtained from the asset by the entity.<\/p>\n<p style=\"text-align: justify;\">The provisions governing charge of depreciation in the erstwhile Schedule\u00a0XIV to the Companies Act, 1956 have been replaced with Schedule II to the\u00a0Companies Act 2013.<\/p>\n<p style=\"text-align: justify;\">AS 6 on \u2018Depreciation Accounting\u2019\u00a0lays down general principles of accounting for depreciation applicable to all entities.<\/p>\n<p style=\"text-align: justify;\">such, the Standard is also applicable to companies in all matters where there are no specific requirements under the Companies Act.<\/p>\n<p style=\"text-align: justify;\">AS 6 also provides that the statute governing an enterprise\u00a0may provide the basis for computation of depreciation.<\/p>\n<p style=\"text-align: justify;\">In AS 6 defines Depreciable assets as follows:\u00a0\u00a0Depreciable assets are assets which:-<\/p>\n<p style=\"text-align: justify;\">(i) Are expected to be used during more\u00a0than one accounting period; and<\/p>\n<p style=\"text-align: justify;\">(ii) Have a limited useful life; and<\/p>\n<p style=\"text-align: justify;\">(iii) Are\u00a0held by an enterprise for use in the production or supply of goods and\u00a0services, for rental to others, or for administrative purposes and not for the\u00a0purpose of sale in the ordinary course of business.<\/p>\n<p style=\"text-align: justify;\">The Companies Act, 2013 requires companies to compute the depreciation in\u00a0accordance with the Schedule II to the <a href=\"https:\/\/www.caindelhiindia.com\/blog\/annual-return-of-company-under-companies-act-2013\/\">Companies Act<\/a> which provides useful\u00a0lives to compute the depreciation.<\/p>\n<p style=\"text-align: justify;\">Accordingly, provisions governing charge\u00a0of depreciation in the erstwhile Schedule XIV to the Companies Act, 1956\u00a0have been replaced with Schedule II to the Companies Act, 2013.<\/p>\n<h3 style=\"text-align: justify;\"><span class=\"ez-toc-section\" id=\"Key_changes_in_the_Schedule_II_to_the_Companies_Act_2103_as_compared_to_Schedule_XIV_to_the_Companies_Act_1956\"><\/span><span style=\"color: #808000;\"><strong>Key changes in the Schedule II to the\u00a0<\/strong><strong>Companies Act, 2103 as compared to Schedule XIV to the Companies Act, 1956:-<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol style=\"text-align: justify;\">\n<li>The Companies Act, 1956 had dealt with only depreciation of tangible assets.<\/li>\n<li>Now, the new Act provides specifically for depreciation of intangible assets which are to be governed as per Accounting Standards.<\/li>\n<li>In fact, intangible assets are amortized and not depreciated, though these words and their actions have same effect on the P &amp; L Account.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"2\">\n<li>Instead of method and rates of Depreciation (whether WDV method or Straight line Method and Single shift or double shift or triple shift)\u00a0useful Lives of Assets\u00a0have been prescribed.<\/li>\n<li>These Useful Lives based on single shift working appear minimum, but, they can, in practice, be different from what is given in the Schedule.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"3\">\n<li>Companies are allowed to follow different useful lives\/residual value if\u00a0an appropriate justification is given supported by technical advice.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"4\">\n<li>Residual value is prescribed at\u00a05% of the original cost\u00a0as the maximum quantum.<\/li>\n<li>Earlier, there was no fixed Residual Value, but, while prescribing the rates; it had factored\u2010in only 95% of the cost of the assets, thereby leaving only 5% as Residual Value.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"5\">\n<li>List of Assets has become more exhaustive and specific.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"6\">\n<li>Issues relating to computation of depreciation prorate are more accounting oriented as contained in Accounting Standards AS\u20106 and AS\u201010 and not company\u2010law oriented.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"7\">\n<li>The new Act provides for the concept of componentization of assets.<\/li>\n<li>Where cost of a part of the asset is significant to total cost of the asset and\u00a0useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"8\">\n<li>Date of purchase is most important to\u00a0calculate\u00a0the remaining useful life of the asset as on 01.04.2014. Carrying Amount of Existing assets are to be\u00a0depreciated\u00a0over the remaining useful lives as on 01.04.2014.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"9\">\n<li>Date of purchase can be found in the fixed asset register or the depreciation\u00a0chart\u00a0of the company and can also be available in the tax\u00a0audit report\u00a0of the Company for various years.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"10\">\n<li>If the life of the asset as on 01.04.2014 is already more than useful life as prescribed in Schedule II, then no depreciation can be charged after 01.04.2014.<\/li>\n<li>However, an amount equal to the (WDV-Residual value) has to be written off from either the P&amp;L A\/c or from the retained earnings of the Company in the FY 2014-15.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"11\">\n<li>During the transitional year i.e. FY 2014-15, The Company cannot change its method of calculating depreciation from WDV to SLM or vice-versa.<\/li>\n<li>Any change by the company in the method of calculating depreciation will amount to change in accounting policy as per AS-5.<\/li>\n<li>The calculation of the impact of such change on the Statement of Profit &amp; Loss has to be disclosed by the company in its financial statements.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"12\">\n<li>No separate rate for double\/ triple shift; depreciation to be increased\u00a0based on the double shift\/triple shift use of the assets.<\/li>\n<li>The rate of depreciation becomes 1.5 times &amp; 2 times of the normal\u00a0rates in\u00a0case of double shifts and triple shifts respectively.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"13\">\n<li>A Charging depreciation is mandatory if the company wants to declare dividend or for payment of managerial remuneration.<\/li>\n<li>Charging depreciation is also mandatory as per the applicable accounting standards in order to give a true &amp; fair view.<\/li>\n<\/ol>\n<ol style=\"text-align: justify;\" start=\"14\">\n<li>As per ICAI guidance note, if the value of the asset is uptoRs. 5000\/- then it can be fully depreciated.<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.<\/p>\n<p style=\"text-align: justify;\">Hope the information will assist you in your Professional endeavors. For query or help, contact: <a href=\"mailto:singh@carajput.com\">singh@carajput.com<\/a>\u00a0or call at 9555555480<\/p>\n","protected":false},"excerpt":{"rendered":"<p>CORPORATE AND PROFESSIONAL UPDATE JULY 10, 2015 All about Depreciation &amp;Key changes in the Schedule II to the\u00a0Companies Act, 2103 Depreciation is systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[3122,3124,3120,3121,3123],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/179"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=179"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/179\/revisions"}],"predecessor-version":[{"id":19077,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/179\/revisions\/19077"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=179"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=179"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=179"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}