How to Incorporate India Companies Act 2013 Guidelines in Fixed Assets?
Last updated on JANUARY 17, 2017
Applies to:Oracle Assets - Version 12.0.0 and later
Information in this document applies to any platform.
How to incorporate India Companies Act 2013 changes in Oracle Fixed Assets?
Companies Act 2013 has introduced a few changes with respect to depreciation calculation of assets. Per the Circular issued by Corporate accounts:
1. For existing assets, from the date this Schedule comes into effect, the carrying amount of the asset as on that date—
I. shall be depreciated over the remaining useful life of the asset as per this Schedule;
II. after retaining the residual value, shall be recognized in the opening balance of retained earnings where the remaining useful life of an asset is nil.
2. During the financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed.
3. Generally, the useful life of an asset shall not be longer than the useful life specified under Schedule II of Companies Act. However, if a Company adopts any depreciation method other than the life mentioned in Schedule II, the following information shall also be disclosed in the accounts with justification,
(i) depreciation methods used; and
(ii) the useful lives of the assets for computing depreciation
4. Useful life specified in Part C of the Schedule is for the whole of the asset. Where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.
5. The Residual value of an asset shall not be more than 5% of the Original cost of the asset. However, if a higher percentage (i.e. more than 5%) the same shall be disclosed in Accounts with justification.
6. The useful lives of assets mentioned in Schedule II are for assets working in single shifts. If an asset is used for any time during the year for double shift, depreciation will increase by 50% during that period and in case of triple shift the depreciation shall be calculated on the basis of 100% for that period.
7. "Factory buildings" does not include offices, godowns, staff quarters.
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