Professional Documents
Culture Documents
• Effluxion of time
• Market changes
Inside:-
• Institute of Chartered Accountants of India(ICAI)
issues Accounting Standard(AS-6) for depreciation
accounting of different assets.
• AS -6 doesn’t applies only for goodwill, forests,
plantations, natural resources like minerals,
expenditure on R&D and live stocks.
• A land is the only exception which cannot be
depreciated as the value of land appreciates with
time, unless it has a limited useful life for the
company.
DEPRECIABLE ASSETS
Assets which are expected to be used during more than one
accounting period and are held by an enterprise for use in the
production or supply of goods and services, for rental to others, or for
administrative purposes with limited useful life.
But not for the purpose of sale in the ordinary course of business.
Determinants of depreciation
• Historical cost or revalued amount of asset.
It is based on its nominal or original cost of asset when acquired by
the company.
• Expected useful life of asset.
Period over which asset is expected to be used and the number of
production expected to be obtained from its use.
• Estimated residual value of asset
It is the amount expected to be realised on disposal of an asset at the
end of its useful life.
METHODS OF DEPRECIATION
SLM- Straight line method.
WDV- Written down value method/Reducing balance.