Depriciation-Change in policy
This query is : Resolved
28 January 2008
If originally the asset was purchased with an option to sell back the asset to the vendor within
stipulated time(if company gets better price in market, it can sell it in the market) and so the
depriciation was charged on the term of the buy back agreement considering the buy back price and
the period of option as the usefull life of the asset. But subsiquently management has decided not
to sell the asset back to the vendor and to retain it. How would this decision affect the charge of
depriciation on such asset?
stipulated time(if company gets better price in market, it can sell it in the market) and so the
depriciation was charged on the term of the buy back agreement considering the buy back price and
the period of option as the usefull life of the asset. But subsiquently management has decided not
to sell the asset back to the vendor and to retain it. How would this decision affect the charge of
depriciation on such asset?
28 January 2008
If the rate of depreciation is more than or equal to the rate specified in COmpanies Act, it's not a problem. Company can continue same rate for depreciating the asset.
29 January 2008
I appologise, i did not mention that the case in consideration is from outside india (Bahrian) and hence the answer is expected in the context of the applicability of IFRS and the IAS.
Is it required to recompute the depriciation retrospectively or else the current carrying value of the asset can be depriciated over the remaining usefull life of the asset?
Is it required to recompute the depriciation retrospectively or else the current carrying value of the asset can be depriciated over the remaining usefull life of the asset?
15 March 2008
There is nothing wrong in calculating depreciation retrospectively in accordance with the schedule and provide only the balance.
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