1.12  Query:   

Accounting for depreciation of existing assets consequent to change

in rates of Schedule XIV to the Companies Act, 1956.

1. Clause 2(b)(iii) of circular no. 14/93, dated 20.12.1993, issued by the Ministry of Law, Justice & Company Affairs, Department of Company Affairs, provides as follows:

“The straight line method rates prescribed in the schedule XIV can be straightaway applied to the original cost of all the assets including the existing assets from the year of change of the date.”

2. According to querist, the meaning of the above alternative is that new rate can be applied to existing assets from the date of commissioning of those assets which can be earlier to 1.4.93, say from 1.4.80, and the difference between the old cumulative depreciation and revised depreciation may be written back and taken into the current year’s profit and loss account as a credit towards excess depreciation written back.

3. The querist has sought the opinion of the Expert Advisory Committee as to whether his view is correct or not.

1. The Committee notes the alternative allowed by the circular no. 14/93 dated 20.12.1993, issued by the Ministry of Law, Justice & Company Affairs, Department of Company Affairs, as reproduced at para 1 of the query.

2. The Committee is of the view that as per the above alternative the new SLM rates prescribed in Schedule XIV should be applied to the original cost of an existing asset from the year of change of rates and not retrospectively.

3. Based on the above, the Committee is of the opinion that the view of the querist as contained in para 2 of the query in not correct.

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