Home > Companies Act 2013 > Depreciation as per Companies Act 2013

Depreciation as per Companies Act 2013

Depreciation Calculator for Companies Act 2013

Depreciation as per companies act 2013 for  Financial year 2014-15 and thereafter. These provisions are applicable from 01.04.2014 vide notification dated 27.03.2014.

  • Depreciation is calculated by considering useful life of asset, cost and residual value.
  • Any method WDV or SLM can be used.
  • Schedule – II contains a list of useful life according to class of assets and the residual value shall not be more than five percent of the original cost of asset.
    However companies are free to adopt a useful life different from what specified in Schedule II and residual value more than 5%. The financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice.
  • If there is any addition to the asset or asset is sold, discarded, demolished or destroyed then the calculation is made according to the date of such event. In other words, if any asset is purchased or sold then the calculation will be made according to the date of purchase or sold i.e datewise calculation is made.
  • Depreciation method used is to be shown in accounts
  • Useful life of assets is to be disclosed only when it is taken different from Schedule – II
  • For assets in which NESD (No Exta Shift Depreciation) is mentioned in Schedule – II, the depreciation remains same irrespective of the no. of work shifts.
  • For other assets, if the asset is used for double shifts during any time of the year then the depreciation shall be increased by 50% for that period. Similarly if asset is used for triple shifts then depreciation shall be increased by 100% for that period.
  • Each Part of an item of an asset with a cost significant in relation to the total cost of the item shall be depreciated separately. Where cost of the part 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 should be determined separately.
    As per the amendment dated August 29, 2014 notified by the MCA, the said requirement shall be voluntary in respect for the financial year commencing on or after the April 1, 2104 and mandatory for financial statements in respect of financial years commencing on or after April 1, 2015.
    Component accounting is required to be done for the entire block of assets as at 1 April 2014 if a company opts to follow it voluntarily and as at 1 April, 2015 mandatorily. It cannot be restricted to only new assets acquired after 1 April 2014 or 1 April, 2015 as the case may be.

If residual value is taken as 5% of cost of asset and life as per schedule – II then the depreciation rates on SLM and WDV basis are given in following link. Depreciation_Rates_as per Companies_Act_2013

Depreciation Calculator for Companies Act 2013

Transitional Provision

For assets existing on 01.04.2014 date of purchase is considered and the balance sheet value has to be depreciated over remaining useful life of assets.
If the remaining useful life of asset is NIL then the amount over and above residual value may be recognized in the opening balance of retained earnings or may be charged off to Profit and Loss account.

if a company uses Written Down Value (WDV) method of depreciation, it will need to calculate a new rate for depreciation to depreciate the asset over their remaining useful life using the formula for calculation of rate for depreciation as per WDV method which is reproduced below –

R= {1 – (s/c)^1/n } x 100

Where  R = Rate of Depreciation (in %)
n = Remaining useful life of the asset (in years)
s = Scrap value at the end of useful life of the asset
c= Cost of the asset/Written down value of the asset

It may be noted that upon transition to Schedule II, the company may have different rates of depreciation for individual assets within the same class in case of existing assets as there will be a different remaining useful life for each asset.

98 comments

  1. How the calculations to be done for assets purchased in FY 2015-16 as per companies act 2013?

  2. I have a company which have to comply with US accounting rules so have to follow calender year from 1-jan-2015 to 31-dec-2015. and we have calculated depreciation as per financial year from 1-4-2014 to 31-3-2015.
    Can anyone provide me any excel sheet or some advice that how to go about it.

    My e-mail id camky007@gmail.com

  3. Dear sir if remaining useful life is less than 1 then will 100% dep will be charged
    and if yes then what will be wdv in next year will it be 0 or amount of scrap value

    • Prateek Agarwal

      Yes, 100% depreciation is charged above the residual value. In next year residual value will be wdv.

  4. How is the calculation to be done for F.Y 2015-16 for the assets which are there in the business?
    Is the rate again calcultaed by using the same formula or just consider the rate which we have taken in F.Y 2014-15 which is derived after considering the formula?

    • Prateek Agarwal

      The rate which is derived for f.y 2014-15 is to be used again for calculating depreciation for f.y 2015-16.

  5. Sir my question is that if i dont know the date of purchase of assets..and I know the opening wdv of value of asset then what should be the best treatment as per depreciation of companies act 2013. ..plzzzz reply

  6. If i dont know Date of purchase then how to apply transition provision .

  7. CMA NIGAMANANDA ROUT

    MY CLIENT HAD PURCHASED A COMPUTER ON 31.10.2012 OF RS 76350.
    DEP ALREADY TAKEN
    1-4-12 TO 31.3-2013 – @60% FOR 152 DAYS =19077
    1-4-2013 TO 31-3-2014 -@40% =22909

    WHAT WILL BE THE DEP AS PER NEW COMPANIES ACT FOR THE PERIOD 1-4-14 TO 31-3-15

Leave a Reply

Your email address will not be published. Required fields are marked *

Get updates and weekly newsletter in your email.

Join more than 20,000 subscribers !

COMPANY DEPRECIATION CALCULATOR

Now use our COMPANY DEPRECIATION CALCULATOR for finding out depreciation on any asset under Companies Act 2013.