Depreciation
This query is : Resolved
18 March 2015
can we deduct depreciation through SLM method under the Companies Act, 2013. I.e. WDV on 31.03.2014 is RS. 100/- and remaining useful life is 10 years after the same day. Hence the Depreciation per year is RS. 10/-(100/10)
Can we do so?
Can we do so?
20 March 2015
can we depreciate through SLM method under CA ,2013?
20 March 2015
can we depreciate through SLM method under CA ,2013?
21 July 2024
Under the Companies Act, 2013, the concept of depreciation is primarily governed by Schedule II, which provides specific guidelines on the useful life and method of depreciation for various categories of assets. The Act primarily prescribes the use of the Straight Line Method (SLM) for calculating depreciation for intangible assets, as well as assets whose useful life cannot be determined. Here's how it applies:
1. **Straight Line Method (SLM):** According to Schedule II of the Companies Act, 2013, the Straight Line Method (SLM) is applicable for assets whose useful life can be reasonably estimated. For such assets, the depreciation amount is evenly distributed over the useful life of the asset. This method ensures that the same amount of depreciation expense is recognized in each accounting period.
2. **Written Down Value (WDV) Method:** While the Written Down Value (WDV) Method is not specifically prohibited under the Companies Act, 2013, it is not the primary method prescribed. WDV method is typically associated with Income Tax Act provisions, where it allows for a higher depreciation charge in the earlier years of an asset's life.
3. **Useful Life Consideration:** For assets where the useful life can be reasonably estimated, the SLM is generally preferred. However, if the useful life cannot be reasonably estimated or is uncertain, then the WDV method may not be appropriate under the Companies Act, 2013.
4. **Specific Asset Categories:** Certain specific asset categories may have different depreciation methods prescribed under Schedule II. For example, intangible assets typically use the SLM, while certain tangible assets might have specific rates or methods mentioned in the schedule.
In your example:
- If an asset has a remaining useful life of 10 years after 31st March 2014, and the SLM is applicable under Schedule II, you would indeed calculate the depreciation as Rs. 10 per year (assuming the depreciation base is Rs. 100 and the useful life is 10 years).
Therefore, under the Companies Act, 2013, while the WDV method is not the primary method prescribed, the SLM is commonly used for calculating depreciation for assets whose useful life can be reasonably estimated. It's important to adhere to the specific guidelines provided in Schedule II for accurate depreciation calculation and compliance with regulatory requirements.
1. **Straight Line Method (SLM):** According to Schedule II of the Companies Act, 2013, the Straight Line Method (SLM) is applicable for assets whose useful life can be reasonably estimated. For such assets, the depreciation amount is evenly distributed over the useful life of the asset. This method ensures that the same amount of depreciation expense is recognized in each accounting period.
2. **Written Down Value (WDV) Method:** While the Written Down Value (WDV) Method is not specifically prohibited under the Companies Act, 2013, it is not the primary method prescribed. WDV method is typically associated with Income Tax Act provisions, where it allows for a higher depreciation charge in the earlier years of an asset's life.
3. **Useful Life Consideration:** For assets where the useful life can be reasonably estimated, the SLM is generally preferred. However, if the useful life cannot be reasonably estimated or is uncertain, then the WDV method may not be appropriate under the Companies Act, 2013.
4. **Specific Asset Categories:** Certain specific asset categories may have different depreciation methods prescribed under Schedule II. For example, intangible assets typically use the SLM, while certain tangible assets might have specific rates or methods mentioned in the schedule.
In your example:
- If an asset has a remaining useful life of 10 years after 31st March 2014, and the SLM is applicable under Schedule II, you would indeed calculate the depreciation as Rs. 10 per year (assuming the depreciation base is Rs. 100 and the useful life is 10 years).
Therefore, under the Companies Act, 2013, while the WDV method is not the primary method prescribed, the SLM is commonly used for calculating depreciation for assets whose useful life can be reasonably estimated. It's important to adhere to the specific guidelines provided in Schedule II for accurate depreciation calculation and compliance with regulatory requirements.
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