Particulars of depreciation to be shown in fixed

assets records under the ‘MAOCARO’1975.

1. In the context of the Manufacturing and Other Companies (Auditor’s Report) Order 1975, [u/s 227(4A) (i) of the Companies Act 1956], the auditor is required to include a statement in his report as to “whether the company is maintaining proper records to show full particulars, including quantitative details and situation of fixed assets…….” The querist has sought the opinion of the Committee on the following matters pertaining to the particulars of depreciation to be shown in fixed assets records: --

(i) In order to report that the Company has maintained proper records showing full particulars, is it necessary that the records should also show the amount of depreciation provided on the fixed assets?

(ii) If the depreciation provided on the fixed assets is not shown in the fixed assets register but only the rate of depreciation is shown therein then could it be said that the company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets?

(iii) If the depreciation provided in the books of accounts is not shown in the fixed assets register either individually or as group of assets then is it necessary for the statutory auditors to qualify their report by mentioning that “the company has maintained proper records showing full particulars (other than depreciation) including quantitative details and situation of its fixed assets”?

2.The querist has drawn the attention of the Committee to Para 22(a) of the Institute’s publication “Statement on the Manufacturing and Other Companies (Auditor’s report) Order 1975” which states as below:

“(a) What are proper records have not been specified but it would appear that normally the records should show the following particulars: --

(1) Sufficient description of the asset to make identification possible.

(2) Classification, that is, the head under which it is shown in the accounts, e.g., plant and machinery, office equipment etc.

(3) Location.

(4) Quantity, i.e., number of units.

(5) Original Cost.

(6) Adjustment for revaluation or for increase or decrease in cost consequent on revaluation of foreign currency liabilities, if any.

(7) Particulars regarding retirement.

It would be desirable if the records also show (i) the year of purchase and (ii) the rate of depreciation or the accumulated depreciation to date.”

3. The querist has drawn the attention of the Committee specifically to the fact that whereas the word should has been used for the above-mentioned 7 particulars to be shown on the fixed assets records, the Statement uses the word desirable for depreciation

Opinion January 19,1982

1. The Committee considered the implications of para 22 (a) of the Statement and noted that the particulars mentioned therein refer to an individual item of fixed assets. It follows that if depreciation had been included along with the 7 items mentioned in the Statement, it would have amounted to showing depreciation for each individual item. A detailed and meticulous calculation of depreciation for each item of fixed assets would, in many cases, be very laborious and time consuming and in some cases may not be possible at all.

2. In view of the above, the Committee’s opinion on the queries is as under: --

(i) In order to report that a company has maintained proper records showing full particulars, it is not necessary to show on such records the amount of depreciation provided on each individual fixed asset where it is very laborious or time consuming to do so. However if such information is available, it would be desirable to do so.

(ii) Even if the fixed assets register does not show depreciation on individual items, it could be stated that the company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets provided information on depreciation is available for the various categories of fixed assets as a whole.

(iii)In view of the (i) & (ii) above, the auditor should not, in the circumstances mentioned above, state in his report that the company has not maintained proper records showing full particulars.