Chapter 1

Depreciation under Companies Act, 2013

1.     Net Worth [Section 2(57)]

2.     Calculation of profits [Section 198]

3.     Declaration of dividend [Section 123]

4.     General instructions for preparation of Balance Sheet and Statement of Profit and Loss of a Company [Schedule III read with Section 129]

5.     Useful life to compute depreciation [Schedule II read with Section 123]

6.     Commencement of provisions of the Companies Act, 2013 with regard to maintenance of books of accounts and preparations/adoption/filing of financial statements, auditors report, Board's report and attachments to such statements and reports — Applicability with regard to relevant financial year

7.     Depreciation on low value items 

7.1.     Can a company still have a policy to fully depreciate 100% of cost of asset below certain amount? 

8.     Useful Life vis-à-vis rates of depreciation 

8.1.     Useful life cannot be derived from the rates of depreciation 

8.2.     Useful Life & Residual Value 

8.3.     Useful life v economic life and acquisition of second hand asset

8.4.     Useful lives as given under Part ‘C’ of Schedule II for various types of assets are indicative only 

8.5.     Revision of the estimated useful life of an asset

8.6.     Residual Value 

9.     Basic Illustrations on Schedule II (2013 Act)

10.  Component Accounting made mandatory 

10.1.   Non-availability of fixed assets register/records – what to do 

11.  Continuous Process Plant

12.  Revaluation of assets 

13.  Unit of Production (UOP) Method of Depreciation 

14.  Transition to Schedule II 

Chapter 2

AS-6 (Revised): Depreciation Accounting

1.     Objective 

2.     Non-applicability of AS – 6 to Depreciable Assets 

3.     Definitions 

4.     Determination of Depreciation 

5.     Historical Cost

6.     Determination of Useful Life 

7.     Review of Useful Life 

8.     Treatment for addition or extension to an existing asset

9.     Determination of Residual Value 

10.  Quantum of Depreciation 

11.  Depreciation Method 

12.  Impact of Rates of Depreciation vis-à-vis Governing Statute 

13.  Change in the Method of Depreciation 

14.  Disclosure Requirements 

15.  EAC Opinions 

Chapter 3

AS-10: Accounting for Fixed Assets

1.     Objective 

2.     Scope 

3.     Exclusions from AS-10 

4.     Definitions 

5.     Identification of Fixed Assets 

6.     Valuation of Machinery Spares (ASI 2)

7.     Components of Cost

8.     Self-constructed Fixed Assets 

9.     Non-monetary Consideration 

10.  Improvements and Repairs 

11.  Retirements and Disposals 

12.  Amount Substituted for Historical Cost

13.  Valuation of Fixed Assets in Special Cases 

14.  Fixed Assets of Special Types 

15.  Disclosure Requirements 

16.  EAC Opinions 

Chapter 4

AS-10: Property, Plant and Equipment

A.    Objective 

B.    Scope 

C.    Definitions 

D.    Recognition 

E.    Initial Costs 

F.     Subsequent Costs 

G.    Measurement at Recognition 

H.    Elements of Cost

I.     Measurement of Cost

J.     Measurement after Recognition 

K.    Cost Model

L.    Depreciation 

M.   Depreciable Amount and Depreciation Period 

N.    Depreciation Method 

O.    Changes in Existing Decommissioning, Restoration and Other Liabilities 

P.     Impairment

Q.    Compensation for Impairment

R.    Retirements 

S.     Derecognition 

T.    Disclosure 

U.    Transitional Provisions 

Appendix  Differences between Ind AS and Indian GAAP 

Chapter 5

Indian Accounting Standards (Ind AS 16):
Property, Plant and Equipment

A.    Objective 

B.    Scope 

C.    Definitions 

D.    Recognition 

E.    Initial costs 

F.     Subsequent costs 

G.    Measurement at recognition 

H.    Measurement of cost

I.     Measurement after recognition 

J.     Depreciation 

K.    Depreciable amount and depreciation period 

L.    Depreciation method 

M.   Impairment

N.    Compensation for impairment

O.    Derecognition 

P.     Disclosure 

Appendix A    Changes in Existing Decommissioning, Restoration and Similar Liabilities 

Appendix B    Stripping Costs in the Production Phase of a Surface Mine 

Appendix C    References to matters contained in other Indian Accounting Standards 

Appendix 1 

Annexure        Opinions given by Ind AS Transition Facilitation Group of ICAI 

Chapter 6

AS-19: Leases

1.     Objective 

2.     Scope 

3.     Lease, Inception of the Lease and Lease Term   

4.     Minimum Lease Payments and Contingent Rent

5.     Finance Lease, Operating Lease, Non-Cancellable and Cancellable Lease 

6.     Economic Life and Useful Life 

7.     Residual Value 

8.     Gross Investment, Net Investment and Unearned Finance Income 

9.     Criteria for Classification of Leases into Finance Lease and Operating Lease 

10.  Situations where a lease would be classified as a Finance Lease 

11.  Classification of Lease into Finance or Operating – at what point of time:

12.  Finance Leases – Accounting Treatment for Lessee 

13.  Disclosure Requirements for Finance Lease in the Financial Statements of Lessee 

14.  Operating Leases – Accounting Treatment for Lessee:

15.  Disclosure Requirements for Operating Lease in the Financial Statements of Lessee 

16.  Finance Leases – Accounting Treatment for Lessor:

17.  Finance Leases – Accounting Treatment for Manufacturer/Dealer Lessor (para 32 to 36)

18.  Disclosure Requirements for Finance Lease in the Financial Statements of Lessor

19.  Operating Leases — Accounting Treatment for Lessor

20.  Disclosure Requirements for Operating Lease in the Financial Statements of Lessor

21.  Sale and Leaseback Transactions 

22.  Disclosure Requirements in case of Sale and Leaseback Transactions:

23.  EAC Opinions 

Appendix  1.       Major Differences between Ind AS 116 and Indian GAAP 

2.     Major Differences between Ind AS 17 and Indian GAAP 

Chapter 7

Ind AS 116 (IFRS 16): Leases

1.     Objective                                                                                                                                      

2.     Scope                                                                                                                                            

3.     Key Definitions                                                                                                                           

3.1      Interest rate implicit in the lease                                                                                   

3.2      Lease term                                                                                                                        

3.3      Lessee’s incremental borrowing rate                                                                           

3.4      Right-of-use asset                                                                                                           

3.5      Short-term lease                                                                                                              

3.6      Variable lease payments                                                                                               

3.7      Sublease                                                                                                                            

3.8      Underlying asset                                                                                                              

3.9      Optional lease Payments                                                                                               

3.10   Lease payments                                                                                                              

4.     Recognition Exemptions                                                                                                           

4.1      Assessing low value leases                                                                                             

5.     Identifying A Lease                                                                                                                   

5.1      Identified asset                                                                                                                

5.1.(a)      Substantive substitution rights                                                                   

5.1.(b)      Portions of assets                                                                                          

5.2      Right to obtain economic benefits from use                                                              

5.3      Right to direct the use                                                                                                     

5.4      Decisions determined during and before the period of use                                     

5.5      Protective rights                                                                                                               

6.     Separating Components of A Contract                                                                                 

6.1      Portfolio application                                                                                                       

6.2      Combination of contracts                                                                                             

7.     Accounting by Lessees                                                                                                              

7.1      Sublease classification                                                                                                   

8.     Accounting by Lessors                                                                                                              

8.1      Lease of land and buildings                                                                                          

9.     Manufacturer or Dealer Lessors                                                                                              

10.  Lease Term                                                                                                                                  

10.1 Lease term of cancellable property rentals under Ind AS 116                                 

11.  In-Substance Fixed Lease Payments                                                                                     

12.  Lessee Involvement with the Underlying Asset Before the Commencement Date       

12.1   Costs of the lessee relating to the construction or design of the underlying asset               

12.2   Legal title to the underlying asset                                                                                 

13.  Lease Modifications                                                                                                                  

14.  Sale and Leaseback Transactions                                                                                          

15. Presentation by Lessee                                                                                                              

16. Disclosure                                                                                                                                     

17. Transitional Provisions                                                                                                              

18.  Rent Concession and Lease Modification                                                                            

19.  Comprehensive Illustrations                                                                                                    

Illustration 1     (IAS 17 vs. Ind AS 116)                                                                                        

Illustration 2     (Identification of lease components)                                                                 

Illustration 3     (Allocation of consideration between lease and non-lease component)     

Illustration 4     (Identification of lease)                                                                                         

Illustration 5     (Lease term - Lease payments on assets not in use)                                        

Illustration 6     (Various cases of lease modifications)                                                               

Illustration 7     (sale and lease back)                                                                                             

Illustration 8     (variable lease payments)                                                                                     

Illustration 9     (irregular lease payments)                                                                                     

Illustration 10   (Variable lease payments dependent on an index and variable lease payments linked to sales)           

Illustration 11   (rent concession due to pandemic)                                                                     

Illustration 12   (municipal taxes)                                                                                                    

Illustration 13   (in substance fixed lease payment)                                                                    

Illustration 14   (in substance fixed lease payments)                                                                   

Illustration 15   (variable payments)                                                                                               

Illustration 16   (Measurement by a lessee and accounting for a change in the lease term):               

Illustration 17   (Modification that is a separate lease)                                                               

Illustration 18   (Modification that increases the scope of the lease by extending the contractual lease term)               

Illustration 19   (Modification that decreases the scope of the lease)                                      

Illustration 20   (Modification that both increases and decreases the scope of the lease)    

Illustration 21   (Modification that is a change in consideration only)                                     

Illustration 22   (Lessee allocation of consideration to lease and non-lease components of a contract – comprehensive example)                                                                                                                                   

Illustration 23   (identifying a lease under a contract for energy/power – power purchase agreement)             

Appendix 1       Exposure Draft for Lease Liability in a Sale and Leaseback – Amendments to Ind AS 116, Leases issued by ICAI on 30th December, 2022                                                                                      

Chapter 8

AS-26: Intangible Assets

1.     Objective 

2.     Scope 

3.     Intangible Asset and other related elements 

4.     Definitions 

5.     Intangible Assets 

6.     Identifiability 

7.     Control and Future Economic Benefits 

8.     Recognition and Initial Measurement of an Intangible Asset

9.     Cost of an acquired Intangible Asset

10.  Modes of Acquiring Intangible Asset

11.  Internally Generated Goodwill

12.  Internally Generated Intangible Assets 

13.  Research Phase 

14.  Development Phase 

15.  Cost of an Internally Generated Intangible Asset

16.  Expenditure on Intangible Asset – Recognition of an Expense or Asset

17.  Subsequent Expenditure 

18.  Measurement Subsequent to Initial Recognition 

19.  Amortisation 

20.  Amortisation Method and Recognition of Amortisation Charge 

21.  Periodic Review of Amortisation Period and Amortisation Method 

22.  Residual Value 

23.  Recoverability of the Carrying Amount

24.  Retirements and Disposals 

25.  Disclosure 

26.  Transitional Provisions (para 99)

27.  Special Situations and Application of AS-26 

Appendix  Major Differences between Ind AS and Indian GAAP 

                                        Chapter 9

             Indian Accounting Standards (Ind AS) 38:
                                  Intangible Assets                                 

Chapter 10

AS-28: Impairment of Assets

1.     Objective 

2.     Scope 

3.     Impairment of Assets 

4.     Other Definitions 

5.     Assets carried at Revalued Amounts:

6.     Identifying an Asset that may be Impaired 

7.     Measurement of Recoverable Amount

8.     Net Selling Price 

9.     Value in Use 

10.  Recognition and Measurement of an Impairment Loss for an Individual Asset

11.  Cash-Generating Units (CGU)

12.  Goodwill

13.  Corporate Assets 

14.  Recognition and Measurement of Impairment Losses for a Cash-Generating Unit

15.  Reversal of an Impairment Loss 

16.  Reversal of an Impairment Loss for a Cash-Generating Unit

17.  Impairment in case of Discontinuing Operations:

18.  Disclosures 

19.  Transitional Provisions (para 124 & 125)

Appendix  Major Differences between Ind AS and Indian GAAP 

Chapter 11

             Indian Accounting Standards (Ind AS-36):
                               Impairment of Assets                              

Chapter 12

Practical Illustrations on Depreciation including Transitional Provisions as per Pre-Revised AS-6
and AS-10

(1)   Computation of depreciation under Schedule II 

(2)   Transitional Provisions under Schedule II 

Part A – provisions that existed till 28th August, 2014 

Part B – provisions with effect from 29th August, 2014 

(3)   Component Accounting under Schedule II 

Chapter 13

Practical Illustrations on Depreciation as per
AS-10 (Revised)

Question 1 [Remodelling cost for supermarket stores]

Question 2 [Incremental costs incurred for constructing an asset]

Question 3 [Capitalisation of net operating costs]

Question 4 [Revaluation of a class of PPE]

Question 5 [Review of estimated useful life]

Question 6 [Depreciation and residual value]

Question 7 [Component accounting]

Question 8 [Review of residual value and useful life]

Question 9 [Evaluating the applicability - AS 10 vs. AS 2]

Question 10 [Acquisition of PPE on deferred settlement terms]

Question 11 [Construction of new production line and dismantling costs]

Question 12 [Leasehold Land-Amortisation]

Question 13 [Bearer Plant]

Question 14 [Spare Parts]

Question 15 [Assets Retirement Obligations]

Question 16 [Enabling Assets]

Chapter 14

Cost Accounting Standards on
Depreciation and Amortisation

1.     Introduction 

2.     Objective 

3.     Scope 

4.     Definitions 

5.     Principles of Measurement

6.     Assignment of Costs 

7.     Presentation 

8.     Disclosures 

                                       Chapter 15

                          Case Laws on Depreciation                         

1.     Deduction of unprovided depreciation for previous years while computing net profit for purposes of managerial remuneration as per provisions of sections 349 and 350 [Vinay Bharat Ram v Registrar of Companies [[2010] 100 SCL 19 (Delhi)]

2.     Refund of balance loan amount when there was a specific condition that at time of repayment of loan company was entitled to adjust therefrom depreciation on vehicles and business losses and accordingly after making such adjustments, balance had been paid to petitioner, is a bonafide dispute [Kunj Behari Rungta v Shree Shyam Radio Taxi Services (P) Ltd. [2004] 53 SCL 404 (Raj)]

3.     Gross profit before interest and depreciation is an indicator of progressive growth, sound financial position of company [[1998] 17 SCL 152 (CLB - New Delhi), Company Law Board, Northern Region Bench, New Delhi, Cebon India Ltd., In re]

Chapter 16

                    Depreciation Requirements under
                                   Competition Act                                 

Chapter 17

Depreciation under Income Tax Act, 1961 and
Reporting under Clause 18 of Form 3CD

1.     Clause 18: Depreciation                                                                                                            

(1)     Applicability                                                                                                                      

(2)     Depreciation under Income-tax Act, 1961                                                                  

(3)     Depreciation and Depreciable Assets – Meaning                                                       

(4)     Accounting Depreciation v Taxation Depreciation                                                    

(5)     Depreciation need not be provided in books to claim depreciation allowance under Income-tax Act, 1961

(6)     Whether the “user” should be judged for block of assets or individual assets      

(7)     Continued ‘put to use’ not necessary for claiming depreciation                             

(8)     In "Finance Lease" Lessor is not "Owner" for Depreciation                                     

QUERY (Depreciation claim on Immovable Property not yet registered in Assessee’s name)         

QUERY (Claim of Cost of Construction on Lease Hold Land as Revenue Expenditure) 

QUERY (Depreciation on vehicle not registered in the Assessee’s name)             

QUERY (Depreciation under succession of business)                                               

QUERY (Computation of Depreciation in case of Amalgamation)                       

QUERY (Assets acquired under hire purchase/installment transactions)              

QUERY (Depreciation on Hotel Building)                                                                   

QUERY (Deduction for Technical Know How)                                                          

QUERY (Validity of the order of the Assessing Officer)                                           

QUERY (Actual cost of Assets for the purpose of Depreciation)                            

QUERY (Depreciation on building held for personal use put into business)         

QUERY (Interest on loan of purchased of Plant & Machinery)                             

QUERY (Foreign Company of the same name)                                                        

QUERY (Interest on waived debt)                                                                                

QUERY (Treatment of MODVAT etc.)                                                                        

QUERY (Treatment of Trial Run Expenses & Income)                                           

QUERY (Treatment of Foreign Currency Fluctuation)                                             

(9)     BSE Membership Card                                                                                                    

(10)  Depreciation on Goodwill purchased                                                                            

(11)  Tax treatment for depreciation on emergency spares                                               

(12)  Business information, contracts, records etc. are “intangible assets” & eligible for depreciation      

(13)  Investment in new plant or machinery [Section 32AC]                                            

QUERY (computation of depreciation and additional depreciation)                    

QUERY (computation of depreciation and additional depreciation – comprehensive)     

(14)  Investment in new plant or machinery in notified backward areas in certain States [Section 32AD]             

(15)  Adjustment made to the written down value under section 115BAC/ 115BAD  

Appendix 1     Table of Rates at which Depreciation is Admissible                                          

Appendix 2     Table of rates at which depreciation is admissible for power generation business      

Chapter 18

Unabsorbed Depreciation under the
Income Tax Act, 1961

1.     Unabsorbed Depreciation [Section 32(2)]

1.1. Prescribed order of Loss Adjustment

2.     Loss Returns [Section 80]

3.     Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. [Section 72A]

4.     Provisions relating to carry forward and set-off of accumulated loss and unabsorbed depreciation allowance in scheme of amalgamation of banking company in certain cases [Section 72AA]

5.     Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in business reorganisation of co-operative banks [Section 72AB]

Chapter 19

CBDT Clarifications on Depreciation under
Income Tax Act, 1961

1.     Leased assets 

2.     Finance Lease Agreements - Effect of publication of Accounting Standards on allowability of depreciation 

3.     Allowance of depreciation when profit is estimated 

4.     Equipments provided at employees' residences 

5.     Foreign motor cars used by tour operators/travel agents 

6.     Tax officers' role in assisting taxpayers 

7.     Treatment of expenditure incurred for development of roads/highways in BOT agreements 

8.     Backward areas of State of Bihar notified under first proviso to section 32(1)(iia) and section 32AD(1)

9.     Additional depreciation under section 32(1)(iia) to printers 

Appendix 1    Schedule II of Companies Act, 2013 versus Schedule XIV of Companies Act, 1956         

Appendix 2    Dividends — Declaration of — Computation of Depreciation under Straight Line Method as Contemplated In Clause (b) of sub-section (2) — Certain Queries Answered         

Appendix 3    Dividends — Declaration of — Accounting Standard (AS) 6 on Depreciation Accounting based on General Principles of Accounting issued by the Council of the Institute of Chartered Accountants of India                                                             

Appendix 4    Commencement of Provisions of the Companies Act, 2013 with regard to Maintenance of Books of Accounts and Preparations/Adoption/Filing of Financial Statements, Auditors Report, Board's Report and Attachments to such Statements          

Appendix 5    Depreciation [Rule 5]