Depreciation rates of companies act 2013

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CA Kunjan - www.canaresh.com (Querist)
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16 September 2015 Is schedule II stating rates of depreciation?

i feel no rates are prescribed in companies act 2013.

Was there any amendment in 29.8.2014?

I mean, do we follow rates of depreciation or just useful life concept for a normal small pvt.ltd. company in hotel industry?

regards, ca kunjan, 9222922292

CA Kunjan - www.canaresh.com

CA Kunjan - www.canaresh.com (Querist)
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18 September 2015 ok i get it.

slm rates are historical cost -residual value /no.of balance years.

wdv rates are to be calculated by this forumla :-
(1-(s/c)^(1/n))*100 where S = Salvage Value, C= Carrying Amount as on 01-04-14, N= Difference of useful life as per new and old schedule

Asha Kanta Sharma

Asha Kanta Sharma

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21 July 2024 Under the Companies Act, 2013, Schedule II does not explicitly prescribe rates of depreciation. Instead, it provides useful lives for various categories of assets. The Act requires companies to depreciate their assets over these specified useful lives, choosing between the Straight Line Method (SLM) or Written Down Value Method (WDV).

Here are some key points to clarify your queries:

1. **Schedule II of Companies Act, 2013:**
- Schedule II lists useful lives for different categories of assets. It indicates how many years each type of asset is expected to be used in the business before it is likely to be replaced. For example, buildings might have a useful life of 60 years.
- The Schedule does not provide specific rates of depreciation. Instead, it mandates that depreciation should be calculated based on the cost of the asset less its residual value over its useful life.

2. **Depreciation Methods:**
- **Straight Line Method (SLM):** Depreciation is charged uniformly over the useful life of the asset. The annual depreciation charge is calculated as (Cost of Asset - Residual Value) / Useful Life.
- **Written Down Value Method (WDV):** Depreciation is calculated on the reducing balance of the asset each year at a fixed percentage rate. The formula you provided, (1 - (S/C)^(1/n)) * 100, is used to calculate the annual depreciation percentage for WDV, where S is the salvage value, C is the initial cost, and n is the remaining useful life in years.

3. **Amendments and Changes:**
- There have been amendments and clarifications related to Schedule II over time. These amendments typically address specific issues or changes in accounting standards.
- It's important to refer to the latest notifications and amendments issued by the Ministry of Corporate Affairs or consult professional resources to ensure compliance with current regulations.

4. **Application for a Pvt. Ltd. Company in the Hotel Industry:**
- For a small private limited company in the hotel industry, you would apply the useful lives specified in Schedule II and choose either SLM or WDV based on your company's accounting policies.
- There is no requirement to follow specific rates of depreciation other than calculating it based on the method (SLM or WDV) and the useful life provided in Schedule II.

In summary, while Schedule II of the Companies Act, 2013 provides useful lives for assets, it does not prescribe rates of depreciation. Companies must calculate depreciation based on the cost of the asset, its useful life, and any residual value, using either the SLM or WDV method as per their chosen accounting policy. For accurate application, staying updated with amendments and seeking professional advice is recommended.

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