depreciation

[d.v. gupta]

Dear All,

can a pvt co. change the dep method from WDV to SLM.  If  yes then How the diffrerence will be dealt in profit and loss account and in calculation  of MAT.

[ajay singh]

Dear Sir,

Yes, Pvt. Ltd. can change depreciation method and for that purpose please refer AS - 6, Depreciation accounting issued by ICAI

 

[kalyanaraman Venkatraman]

Dear D.v.Gupta,

Regarding Companies Aspect :

can change the Depreciation Method in Companies Act and accordingly you can charge to P&L A/c. Reason for changing deprecition should be genuine. There is no effect in MAT.

Regarding Income tax Aspect :

There is no question since single method is to be followed i.e WDV.

 

Thanks

 

raman

[CA Rachit Agarwal]

The excess or short depreciation till the opening date will be adjusted in PL Appropriation accounts.

MAT is applicable on the profit as per books of accounts. In our opinion any adjustment of above would not be considered for the MAT purposes.

[DEV KUMAR KOTHARI]

A company can change method of accounting from one regualr method to another regular method. It is advisable that there should be commercial expediency for such change, though increasing PAT is also a factr of commercial expediency, yet only increasign PAT ( by reducing tax) will not be viewed without allegation of tax avoidanc.e

Generally when you change from WDV to SLM, the chargeable deprecaition shall reduce ( except in situation of more high rate items and shorter period lapsed by) therefore, lower deprecaition charged will increase your book profit.

a decision to change method or rates of deprecaition is taken during accounting period, therefore entire amount should come above the line with disclsoures as to impact of amount  for the year  and impact relating to prior periods.

AI Summary

Depreciation method change: companies may switch WDV to SLM with disclosures; tax depreciation unchanged and MAT may be affected. Private companies may change depreciation method from WDV to SLM under AS 6 and company law when there is commercial expediency. The change should be applied in the period of decision with disclosure of current year and prior period impacts; adjustments up to the opening date are reflected in P&L appropriation or brought above the line. Tax depreciation remains governed by tax law (WDV), so statutory depreciation and tax consequences are unaffected; MAT is based on book profit, and increased book profit from lower depreciation can affect MAT, requiring documented rationale and disclosure.