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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. Prashant Mulay

    Dear Sir, could you please send to me the new method of calculation of depreciation as per act 2013 ? I have to learn it asap for the F.Y. 15-16

  2. which depreciation method should be used for financial year 2014-15?

    • Rohit Pithisaria

      Any method can be used SLM or WDV but you should used it consistently or employed that method which you used last year.

  3. DR A K PANDEY

    HOW TO CALCULATE THE DEPRECIATION OF FIXED ASSETS OF THE COMPANY ACQUIRED BEFORE 2013 IN THE FINANCIAL YEAR 2015-16

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