Practical aspects related to Depreciation ScheduleII Companies Act, 2013

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT, 2013 Date: 13th August, 2015 Time: 4:00 PM to 6:00 PM Venue: Hotel Taj, Sector-17A, Chandigarh Team AGBians Organizers- Young Members Empowerment Committee of ICAI and Chandigarh Branch of NIRC - ICAI

Transcript of Practical aspects related to Depreciation ScheduleII Companies Act, 2013

Page 1: Practical aspects related to Depreciation ScheduleII Companies Act, 2013

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT, 2013Date: 13th August, 2015

Time: 4:00 PM to 6:00 PMVenue: Hotel Taj, Sector-17A,

Chandigarh                                                 

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Organizers- Young Members Empowerment

Committee of ICAI and Chandigarh Branch of NIRC -ICAI

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CHALLENGESunder CA 2013

Deciding about Residual Value of Existing Asset

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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Prescribed Class of Companies –To follow

AS approved by NFRA – no such

categorization till now S133

Companies regulated by Regulatory Authority – as

notified by regulatory authority

For other Companies – As per Schedule II

Part C

Categorization – for Applicability

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CHALLENGESunder CA 2013

Computation of depreciation in case

of Double / Triple shift

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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CHALLENGESunder CA 2013

Finding Current Value of existing

Asset (in case fixed asset records

available)

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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CHALLENGESunder CA 2013

Finding Current Value of existing Asset

(in case fixed asset records are not available…)

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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CHALLENGESunder CA 2013

Which one to Supersede in case of

Contradiction b/w AS-6 &

Schedule II

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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CHALLENGESunder CA 2013

Impact of 29th August Notification

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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CHALLENGESunder CA 2013

Applicability of Schedule II

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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CHALLENGESunder CA 2013

Finding Rate of Depreciation in

case of WDV Method

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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Schedule II effective from

1st April, 2014Notification

S.O.902(E)dated 26th March, 2013

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2013

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NOTIFICATION

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SCHEDULE IIPART A

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•Systematic allocation of depreciable amount of an assetDEPRECIATION

•Period over which an asset to be available for use

USEFUL LIFE

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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Schedule IIPart B

Regulatory Authority / CG Precede over Schedule II

Useful life or Residual Value

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013

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Basis of Depreciation

Useful Life

Part ‘C’ Schedule II

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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Assets are classified into 15 Heads and multiple sub-

heads

Part ‘C’ Schedule II

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Depreciation Methods

Written Down Method

Straight Line Method

VOLUNTARY

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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Notification No. GSR 627 (E) [F.NO.A17/60/2012-CL-V] dated29th August, 2014

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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DepreciationS 123(2) Sch . II

Concept of Residual ValueConcept of Useful Life Depreciation includes Amortization

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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CA 1956

Depreciation on the basis of Percentage

No Scrap Value Concept

Rates were prescribed for Intangible assets also

Concept of Componentization

Depreciation to be increased based on double shift(50%)Triple shift(100%) of an asset

No separate rate for Double/Triple Shift

No Concept of Component Accounting

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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BenefitsOf

New Provisi

ons

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PART 3 of PART A Of SCHEDULE II

Residual value shall not be more

than 5% of the original cost of the

asset. Team AGBians

PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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POINT TO REMEMBER..!!

To adopt different useful life

than the Schedule II

One needs to provide justification

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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POINT TO REMEMBER..!!

To adopt higher residual value

>5%

One needs to provide

justification Team AGBians

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WHY DIFFERENT USEFUL LIFE ?????

Quality of Assets

Customized Assets

Superior / Inferior Technology

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PARA 4 Under Part C of Schedule II

Significant part to the Total Cost

The part

should have different useful life than the main asset

COMPONENTACCOUNTING

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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Voluntary

•F.Y 2014-2015

Mandatory

• F.Y 2015-2016 and thereafter

Applicability of Component Accounting- Notification dated 29th August, 2014

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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POINT TO REMEMBER:- COMPONENTIZATION

AS-10 • Accounting Standards for Fixed Assets

AS-16 • Accounting Standards for

Property, Plant and Equipment

NOT MANDATORY

MANDATORY

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Part 7 in part C NIL

Net Carrying amount after Remaining Residual Value

Debit-Opening Retained Earnings

EXIST

Shall be depreciated over the useful life of the asset.

Debit-Profit & Loss a/c

Remaining Useful life of an asset as per CA, 2013 as on 01/04/2014

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

2013When Depreciation on pro rata Basis ??•Addition made to any assets •When asset has been-

SoldDiscardedDemolishedDestroyed

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AS-26 Intangible Asset

Amortization means Depreciation in the value of Intangible

asset (except toll roads)

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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Rate of Amortization- Amount of Amortization *100 Cost of Intangible asset

Amount of Amortization- Actual revenue for the year *100

Projected Revenue from the Intangible asset

AMORTIZATION CALCULATIONFor toll roads (under PPP Model)

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Is all Intangible assets governed

by AS-26 ??

Toll Roads created under Built operate

and transfer or under any other PPP model

Exception

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Does the Intangible asset has finite life ???

YESAmortize

the intangible

asset

NONo

Amortization of

intangible asset

Determination of Intangible Asset

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PRACTICAL ASPECTS RELATED TO DEPRECIATION UNDER COMPANIES ACT,

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www.agbcorplegal.com09811386723

Ajay Garg Team AGBians

Thank You !!