Depreciation Calculator and Major Issues in Depreciation Calculation

CA Sahil Garg

Mechanism of calculating the depreciation has been changed with the introduction of Companies Act 2013. Schedule II of Companies Act, 2013 has given useful life of the assets and provided that depreciation should be charged based on the useful life of the assets.

I have made and attached herewith Depreciation Calculator as per WDV Method (for Single Shift).

People are facing many issues while practically applying Schedule II. I have analyzed and found solution to top 5 issues as below:

1. Depreciation @ 100% on Assets having cost upto Rs. 5000 – Such provision has been deleted in Companies Act 2013. But as per Application Guide issued by ICAI, a company may have a policy to depreciation @ 100% some assets having immaterial cost. Therefore if a company follow a policy to depreciate @ 100% assets upto say Rs. 2000 or Rs. 5000, then it will be legal.

2. Scrap Value of Assets existing on 01.04.2014 : 5% of Original Cost or 5% of Carrying Cost as on 01.04.2014 – Companies Act state that 5% scrap value shall be remaining after the end of useful life. But there is differ opinion in case of assets existing as on 01.04.2014. Some opinion says 5% of Original Cost should be scrap value for such assets, whereas some says 5% of Carrying Value as on 01.04.2014. Schedule II does not make clear explanation regarding this. However as per Application Guide issued by ICAI, it is clear that 5% of Original Cost should be the scrap value.

3. Shifting from WDV Method to SLM : Whether comes under Transition Effect or Change in Accounting Policy –  This is also a point which has become a issue. Companies who have adopted WDV Method till 31.03.2014 and want to apply SLM from 01.04.2014 as per Companies Act 2013, it will be change in accounting policy. Some people says that there is a change in law, no accounting policy has changed and hence retrospective effect is not to be recorded in books of accounts. But this opinion is wrong. Company has to record retrospective effect and should disclose the appropriate reason of change in policy in its Notes to Accounts in Financial Statements.

4. Additions made during the Year  – For additions made during the year, company should charge proportionate depreciation from the date of purchase to year end. However a company may have the policy to group together assets purchased during a duration for charging depreciation. For instance, company may have the policy which states assets purchased on any day in the month of april, depreciation will be charged from 1st April.

5. Adjustment against Opening Retained Earnings: Mandatory or Optional- For assets which have exceeded their useful life as on 01.04.2014, amount equal to (Carrying Cost as on 01.04.2014 – Scrap Value) shall be adjusted with Opening Retailed Earnings. Initially this provision was mandatory, but now MCA has made it optional and company now have the option to adjust it in Profit and Loss Account. But if they do so, they further have to record tax effects.

Download Depreciation Calculator as per WDV Method (for Single Shift)

(Contact at ca_sahilgarg@outlook.com, 9873248478)

Also Check Depreciation Calculator Submitted by Dilip Kumar (hodaccounts@sipralabs.com)

Download WDV Method Depreciation calculator as per Companies Act 2013