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Depreciation under companies act

Shikha Bajaj (CA ) (433 Points)

09 December 2009

Anyone Pls advise whether there is any restriction of using SLM or WDV under companies act or a company may use any one method as per its discretion? Pls provide the reference of the related section.

Thanks in advance!

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Dhruv (Chartered Accountant) (308 Points)
Replied 09 December 2009

A company may adopt more than one method of depreciation. Thus, it is permissible to follow different methods for different types of assets provided the same methods are consistently adopted from year to year in accordance with Section 205(2). Also, units in different geographical locations can follow different methods of depreciation provided the same are consistently followed.

For your reference please go through Guidance Note on Accounting for Depreciation for Companies issued by the ICAI along with AS 6 .

The depreciation method selected should be applied consistently from period to period. A change from one method of providing depreciation to another should be made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise.