DEPRECIATION AND AMORTISATION

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....resentation and disclosure in cost statements. 2. Objective The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the Depreciation and Amortisation with reasonable accuracy. 3. Scope This standard shall be applied to cost statements which require measurement, assignment, presentation and disclosure of Depreciation and Amortisation, including those requiring attestation. 4. Definitions The following terms are being used in this standard with the meaning specified:- 4.1. Amortisation: Amortisation is the systematic allocation of the depreciable amount of an intangible asset over its useful life. It refers to expensing the acquisition cost minus th....

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....cted from being exchanged or used to settle a liability for at least twelve months after the reporting period. 4.5. Depreciation: Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. 4.6. Depreciable amount: The cost of an asset, or other amount substituted for cost in the financial statement, less its residual value. 4.7. Depreciable property, plant and equipment are tangible assets that: (a) are held for use in the production of goods or supply of services, for rental to others, for administrative, selling or distribution purposes; and (b) are expected to be used during more than one accounting period. Land is not a depreciable asset as ....

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.... considered as zero if the entity is unable to estimate the same with reasonable accuracy. The minimum amount of depreciation to be provided shall not be less than the amount calculated as per principles and methods as prescribed by any law or regulations applicable to the entity and followed by it. 5.2. In case of regulated industry the amount of depreciation shall be the same as prescribed by the concerned regulator. 5.3. While estimating the useful life of a depreciable asset, consideration shall be given to the following factors: (a) Expected physical wear and tear; (b) Obsolescence; and (c) Legal or other limits on the use of the asset. 5.4. The useful life of an intangible....

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....6. Depreciation of any addition or extension to an existing depreciable asset which becomes an integral part of that asset shall be based on the remaining useful life of that asset. 5.7. Depreciation of any addition or extension to an existing depreciable asset which retains a separate identity and is capable of being used after the expiry of the useful life of that asset shall be based on the estimated useful life of that addition or extension. 5.8. The impact of higher depreciation due to revaluation of assets shall not be assigned to cost object. 5.9. Impairment loss on assets shall be excluded from cost of production. 5.10. The method of depreciation used shall reflect the pattern in which the asset's....

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....ed on the basis of the number of days for which the asset was used for the preparation and presentation of financial statements, depreciation of the asset for assigning to cost of object shall be measured in relation to the period, the asset actually utilized. 6. Assignment of Costs 6.1. Depreciation shall be traced to the cost object to the extent economically feasible. 6.2. Where the depreciation is not directly traceable to cost object, it shall be assigned based on either of the following two principles: i. Cause and effect - cause is a process or operation or activity and effect is the incurrence of cost. ii. Benefits received- depreciation is to be apportioned to the various cost objects in propo....