Depreciation does not apply to forest products, wasting assets, livestock, goodwill, land (except for short purpose and leasehold)
Amount of depreciation to be charged every year is based on historical cost, expected useful economic life and estimated residual value (scrap)
Methods of depreciation used is SLM, WDV, full depreciation in same year for small value item, or any other method carefully selected.
A method of depreciation in use can be changed if required by law or AS or it will result in better presentation of financial statements.
When a method is changed, it must be applied retrospectively and deficiency or surplus due to change must be adjusted in the P & L Account in the year of change. Impact of change should be disclosed.
In respect of assets purchased on credit involving foreign currency loans, any increase or decrease in liability due to change in exchange rates should be adjusted in historical cost of assets.
In respect of revalued assets, depreciation should be calculated on revalued amount.
Useful life should be constantly reviewed and un-amortized amount should be charged over the remaining life.
Assets purchased on hire purchase basis should be depreciated with respect to its cash price.
Disclosure should be based regarding historical cost, depreciation method, rate, useful life, addition deletion, depreciation for the year, and accumulated depreciation.
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