AS-6 – Depreciation Accounting :

This accounting standard makes recommendation in respect of accounting treatment of matters such as allocation of depreciable amount, estimation of useful life of a depreciable asset, change in the depreciation policy, change of historical cost of depreciable asset, revaluation of depreciable asset etc. The standard recommends that depreciation on depreciable asset should be allocated on a systematic basis to each accounting period during the useful life of the asset. The depreciation method selected should be applied consistently from period to period. A change in one method of providing depreciation to another method should be made only if the adoption of the new method is required by statute or for compliance with the accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of financial statements. When a change in the method of depreciation is made depreciation should be recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective recomputation of depreciation in accordance with the new method should be adjusted in the accounts in the year in which the method of depreciation is changed. The depreciation method should be selected on the basis of expected physical wear and tear of assets, obsolescence, legal or statutory limits on use of the asset. If any depreciable asset is disposed of, discarded or demolished or destroyed, the net surplus or deficiency should be disclosed in the financial statements. The following information should be disclosed in the financial statement: (i) historical cost or other amount substituted for historical cost of each class of depreciable asset; (ii) total depreciation for the period for each class of assets; (iii) the related accumulated depreciation; (iv) depreciation methods used; and (v) depreciable rates or the useful life of the assets, if they are different from the principal rates specified in Schedule XIV.