can branches follow seperate depreciation policies
4 Replies
Sumit Bhimrajka
(ASST. MANAGER (A/CS & FIN.))
(26 Points)
Replied 24 October 2012
No.
Branches cannot follow separate depreciation policy because choosing of method to be employed for depreciation is a policy decesion but the rate and the other aspects regarding computation and charging of depreciation are set out by the concerned authorities which has to be uniformly applied to all the units of the entity.
Milind M. Kulkarni
(Practicing CA)
(580 Points)
Replied 25 October 2012
Method and rates of depreciation to be followed for branch fixed assets is to be decided by HO of the company. These can be different from the method and rates followed for HO assets if HO Accounts so decides (the decision making power is with HO and not with branches). This can be done if HO Accounts can justify a different method and different rates and these are in compliance with AS - 6 and Schedule XIV of the Companies Act.
selim
(Manager (Finance) )
(62 Points)
Replied 25 October 2012
i guess, a entity (may have multiplr btanches under same entity) should have same depreciation policies.
(Guest)
As per para 12 of AS 6 combination of different methods (different accounting policies) can be adopted by the enterprise as per para 12 of AS 6 . which is reproduced below
12. There are several methods of allocating depreciation over the useful
life of the assets. Those most commonly employed in industrial and
commercial enterprises are the straightline method and the reducing balance
Depreciation Accounting
method. The management of a business selects the most appropriate
method(s) ( which indicates that more than one method can be adopted ) based on various important factors e.g., (i) type of asset, (ii) the
nature of the use of such asset and (iii) circumstances prevailing in the
business. A combination of more than one method is sometimes used. In
respect of depreciable assets which do not have material value, depreciation
is often allocated fully in the accounting period in which they are acquired.
Finally the depreciation policy which you have adopted for branch assets should be in consistent manner.
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