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Depreciation rate less that Sch XIV rates

Venkata Ramana Sriram (Service) (119 Points)

02 July 2010

Dear All,

Can a company, working in three shifts, can claim depreciation @ 13.91 instead of the rate applicable for three shifts ?

Will it be considered as statutory violance ? How to rectify for earlier years ?

Regards,

S.V.Ramana.

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4 Replies

CA Sanjay Jha (ACCOUNTS MANAGER) (914 Points)
Replied 02 July 2010

Dear Raman G

we have to two option to claim depreciation

Firstly as per company law i.e. 13.91%

Secondaly as actual i.e. shiftwise.

but when u have to change method , it is as per indian standard, GAAP and other compliance.

if it represnet true and fair view then u have to definete change

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Amir (Learner) (4016 Points)
Replied 02 July 2010

Dear Venkat Sir,

Rates of depreciation, as prescribed by Schedule XIV are minimum rates & a company cannot charge depreciation at a rate lower than those prescribed.

A higher rate can be charged.

So, if a company is using any asset for multiple shifts & charging the depreciation as per single shift then this calls for the auditor's qualification in the report.

As far as rectification goes - The arrears of additional depreciation shall be shown under "Prior Period Items" as required by AS - 5.

Sanjay Sir, I think there is a little misunderstanding since you have suggested the procedure for "Change of accounting Policy" as "Change of rate of Depreciation" is a "Change of Accounting Estimate" & is not a "Change of Accounting Policy" in terms of AS-5