Whether impairment of assets is also a part of depreciation under section 350 of companies act and before declaring dividends impairment of assets also should be adjusted or not.
please treat this as urgent and help
1 Replies
Pavan Jain S
(Chartered Accountant)
(1575 Points)
Replied 24 June 2009
The amount of depreciation to be deducted shall be arrived at by applying the rates of depreciation specified in schedule XIV to the Act or actual rate, whichever is higher. A strict interpretation of the provision would mean that impairment has not be considered. But, it has to be remembered that the rates of depreciation specified in the schedule supra are minimum rates.
But the provision also requires that for the purposes of arriiving at the divisible profits for distribution of dividend, provision has to be made for depreciation and past lossess, for reserves or for other purposes. Hence, impairment of assets has to be deducted before arriving at the figure of divisible profits.
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