ICAI issues Draft Guidance Note on Depreciation under the Companies Act, 2013

Institute of Chartered Accountants
of India (ICAI) has recently withdrawn 5 Guidance Notes, including Guidance
Note on Accounting for Depreciation in Companies as per the Companies Act,
1956. Under the Companies Act, 1956, Schedule XIV was dealing with provisions
of depreciation. Now, the said Schedule XIV of Companies Act, 1956 has been
replaced by Schedule II of the Companies Act, 2013. Accordingly, ICAI has
issued Draft Guidance Note on Some Important Issues Arising from Schedule II to
The Companies Act, 2013 to provide guidance on Schedule II of Companies Act,
2013. Further, ICAI has already been issued Application Guide on the Provisions
of Schedule II to The Companies Act, 2013.

The draft guidance note provides
guidance on following:-
v  Estimation of useful live and residual value of various
fixed assets;
v  Charging of depreciation on Continuous Process Plant;
v  Charging of depreciation, in case of multiple shift basis
use of asset;
v  How to apply Unit of Production Method for charging depreciation;
v  First time application of Schedule II of the Companies Act,
v  Amortization of intangible assets created under Build,
Operate and Transfer; and Build, Own, Operate and Transfer contracts;
v  Use of different methods of depreciation for assets located
at different locations; and
v  Other provisions of Schedule II, like depreciation in case
of revaluation, depreciation on low value items, component approach of Schedule
II etc.
The draft Guidance Note is open for
public comments till November 25, 2015.
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