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 Shreyans Jain, Vinita Khemani
The Companies Act, 2013 requires companies to compute the depreciation in accordance with the Schedule II to the Companies Act which provides useful lives to compute the depreciation. Accordingly, provisions governing charge of depreciation in the erstwhile Schedule XIV to the Companies Act, 1956 have been replaced with Schedule II to the Companies Act, 2013.

Overview of some of the key changes in the Schedule II to the Companies Act, 2103 as compared to erstwhile Schedule XIV to the Companies Act, 1956 are as follows:
• Schedule II prescribes indicative useful lives of various assets instead of Straight Line Method (SLM)/ Written Down Value (WDV) rates for calculating depreciation
• Useful lives prescribed for tangible assets only
• No life prescribed for intangible assets. Notified accounting standard to govern the same
• Depreciation is systematic allocation of the depreciable amount of an asset over its useful life.
• The depreciable amount of an assets is the cost of an asset or other amount substituted for cost, less its residual value
• Useful life is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity. Schedule XIV of Companies Act, 1956 does not include such requirement.
• Companies are allowed to follow different useful lives/residual value if an appropriate justification is given supported by technical advice.
• Component accounting and useful life of a significant part of an asset to be determined separately
• No separate rate for double/ triple shift; depreciation to be increased based on the double shift/triple shift use of the assets
• Useful lives of fixed assets prescribed under schedule II are Act different from those envisaged under Schedule XIV of the Companies Act, 1956.
• No reference to depreciation on low value assets.

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11 Comments

  1. Shreyans Jain says:

    We have posted a video on Youtube….
    If anybody doesn’t gets the file…then he can visit on youtube 
    Link :-  youtube.com/watch?v=Az_57bQphaU

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