18.10. Depreciation under Companies Act, 2013 (India)

Try these first

1. 1.

   What is depreciation according to the Companies Act, 2013?

   Hint

   Think about what happens to the value of an asset over time.

2. 2.

   Why is component accounting necessary?

   Hint

   Consider the different life spans of components in machinery.

3. 3.

   What does the Companies Act, 2013 specify regarding depreciation?

   • a) Specific methods of recording depreciation
   • b) Useful lives of assets
   • c) Different expense classifications

   Hint

   Refer to Schedule II of the Act.

4. 4.

   True or False: Companies can adopt different useful lives for their assets under the Companies Act, but must justify their choices.

   • True
   • False

   Hint

   Think about why flexibility is important in financial reporting.

5. 5.

   Imagine a company that owns a factory with various machines, each made of multiple parts. One machine has a motor, conveyor, and body, with differing lifespans. Analyze how the company should account for depreciation under component accounting.

   Hint

   Consider how the different parts wear out.

6. 6.

   A company decides to change the useful life of an asset from 10 to 15 years based on new justified calculations. Discuss the impact this might have on their financial reporting.

   Hint

   How will this change affect the company's cash flows?