Deprecation under Schedule II to the Companies Act 2013
The recent enactment of the Companies Act, 2013 is a dawn of a new era. After bringing far-reaching changes in various areas, the spectrum of financial reporting has widened and brings higher responsibilities to those associated with financial reporting, be it the auditors or the management. One such area is Depreciation.
THE 2013 ACT VS THE 1956 ACT, AN OVERVIEW:
The Depreciation on fixed asset as per Schedule-II of Companies Act, 2013 became operational from 01/04/2014 vide MCA notification no S.O.902(E) dated 26/03/2014. From the date this Schedule comes into effect, the carrying amount of the asset as on that date –
- shall be depreciated over the remaining useful life of the asset as per this Schedule;
- after retaining the residual value, may be recognised in the opening balance of retained earnings where the remaining useful life of an asset is nil.
Thus in respect of assets, whose remaining useful life is NIL, there is an option to charge the carrying amount of asset either to retained earnings or to the Statement of Profit and Loss.