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FAQ on Depreciation

FAQ on Depreciation

Q1. When are the new provisions of depreciation applicable from?

A. New provisions of CA 2013 Act are made applicable w.e.f. 1 st April, 2014.

Q2. Should one wait for next financial year or comply now?

A. Yes, the provisions should be complied right from April, 2014 mandatorily as the carrying cost is to be depreciated in remaining useful life of an asset as per Schedule II, and where remaining useful life is Nil, carrying cost (after retaining residual value) is to be recognized in opening balance of retained earnings.

Q3. What can be the Estimated Residual Value of an asset?

A. Residual value should generally be not more than 5% of the original cost of the asset for all companies (other than Regulatory Authority constituted under an Act of Parliament or by Central Government). However, it can be higher in case of all other companies, if justification is disclosed in .

Q4. What is the useful life of the assets to be taken?

A. Useful life of assets have been prescribed under Part C of Schedule II (for other than Regulatory Authority). The useful life shall not be more than as prescribed in Part C . In case it is more than that prescribed in Part C of schedule II then justification for the same needs to be given in financial statement.

Q5. What if useful life of a part of asset is significant and different from useful life of the remaining asset?

A. In that case, useful life of the significant part shall be determined separately. For instance, Asset X has 3 components- Part A, B and C which have different costs and useful lives. Depreciation would be considered separately for such parts as per Schedule II.

FAQ on Depreciation

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