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Urgent: depreciation calculation

CA Chandan Singh (Chartered Accountant) (49 Points)

25 June 2015

Dear Members, does it necessary to take residual value of asset while calculating depreciation under Companies Act 2013..reply soon please

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12 Replies

(Guest)

depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value.

so yes, u need to take residual value in consideration while calculating dep.

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Gowtham (Student) (1174 Points)
Replied 25 June 2015

Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Ordinarily, the residual value of an asset is often insignificant but it should generally be not more than 5% of the original cost of the asset.

This is the only context in schedule III, which speaks about residual value.

As we see, i places only upper ceiling, which means u can even write off fully

Gowtham (Student) (1174 Points)
Replied 25 June 2015

But the archetypal %-s like 25.89, 18.1, 13.91 r all computed conceiving 5% as residual value.

That is if u depreciate assets at that rate, at the end of the day u will have 5% of the cost of the asset remaining.

So u should compute the rate of dep. if u have want to have a different residual value

CA Suri Kota (Assistant Manager @ EY) (955 Points)
Replied 25 June 2015

Yes. You have to reduce the capital asset by its residual value if it is significant for dep calculation

Thanks,

Suri

Sandeep Gupta (CA Practice ) (22 Points)
Replied 25 June 2015

Word here to stress upon Is "ordinarily" so 5 % is just a value given in company law for all those assets Where it's impracticable to assess residual value for other assets , where residual value can be calculated , eg long term contract of buy back of a machine by seller at an agreed price at time of sale

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Sandeep Gupta (CA Practice ) (22 Points)
Replied 25 June 2015

Mohammad saifee (Entrepreneur ) (72 Points)
Replied 25 June 2015

Technically, if the company is using straight line method of depreciation then residual value will be relevant for decision making.

venkanna setty (Student CA Final ) (27 Points)
Replied 25 June 2015

Can we calculate residual value at 5% on carrying amount of asset ( bcz it is lesser than the 5% of actual cost of asset ) ?? 1.And I am not able to calculate depreciation rate (WDV Method ) if I consider residual value as zero. 2. Can you please help me to calculate depreciation rate (WDV Method ) with zero residual value . Thanks n Regards Venkanna Setty

vikas Gupta (CA STUDENT) (41 Points)
Replied 29 June 2015

Provide Mail id pls I will provide u an excel where your work get easier

amit (CA Job) (31 Points)
Replied 30 June 2015

Dear Member, as per Schedule II of the Companies Act, 2013, it is mandatory to consider residual value of fixed assets while arriving at depreciation rate to be applied for computing depreciation charge on an asset. As per schedule II of the Comapnies Act, 2013, residual value cannot be more than 5% in ordinary cases. However, you may consider residual value NIl if you are not sure about the realisable value of asset after useful life, for the purpose of computation of depreciation.

regards

Amit