1. Topic: AS-6
Submitted To:
DR. Harsh Pratap Singh
Assistant Professor
(Finance)
Presented By:
Team Members
1. Aman kumar Verma (GM17027)
2. Aayush Agarwal (GM17001)
3. Abhinendra Singh (GM17007)
4. Amit Kumar Tiwari (GM17029)
5. Radha Sharma (GM17273)
6. Akansha Chakravorty (GM17019)
Accounting For Managers Presentation
PGDM Batch 2017-2019 Term I
Section __A___ Team No. __01___
2. *Meaning & Definition
*Features & Causes of Depreciation
*Depreciable Assets
*Applicability of AS-6
*Calculation of Depreciation
*Methods of Depreciation
*Change in method of Depreciation
*AS-6 Disclosure
*Important points of AS-6
3. *Depreciation means decline in the value of fixed
assets on a/c of use & effluxion of time.
*Depreciation is a gradual, continuous & permanent
decrease in the value of an asset.
* It was issued in 1982 by ICAI & later on revised in
1994.
4. *AS-6,Depreciation Accounting defines depreciation as
a measure of the wearing out consumption or other
loss of value of a depreciable asset arising from use,
effluxion of time or obsolescence through technology
or market changes.
5. *Features of Depreciation
Depreciation is a part of operating cost.
It is a reduction in the value of an asset.
The decrease in the value of an asset is gradual &
continious.
Causes of Depreciation
Physical wear & tear
Physical Deterioration
Expiry of legal rights
Obsolescence
6. Depreciable Assets are those assets which:
1. are expected to be used for more than 1 accounting
period.
2. Have a limited useful life.
3. Are held for the purpose of production of goods &
services.
7. AS-6 is applicable to all depreciable assets, except the
following:
i. Forests, Plantation
ii. Wasting Assets, Minerals
iii. Expenditure on R & D
iv. Goodwill
v. Live-stock cattle, Animal Husbandry
8. The amount of Depreciation is calculated as under:
1) Historical cost of the asset.
2) Estimated useful life of depreciable asset.
3) Estimated residual/scrap value of depreciable
assets.
9. Depreciable Amount = Historical Cost- ERV
E.g: Cost of asset=500000, ERV=25000
Depreciable Amount = H.C –ERV
=500000-25000
= 475000.
Depreciable amount is allocated over the estimated
useful life of depreciable asset.
10. 1. Straight Line Method
2. Reducing Balance Method
3. Sinking Fund Method
4. Insurance Policy Method
5. Sums of the digit Method
6. Revaluation Method
7. Depletion Method
8. Machine Hour Rate Method
9. Replacement Method
11. Changes in Depreciation
Method
Change in method of Depreciation is done in the
following conditions:
For compliance of status
For compliance of AS’s
For more appropriate presentation of the financial
statement
12. *The Depreciation method used, the total depreciation
for the period, gross amount of depreciation of each
class has to be disclosed in the Financial Statements.
* If the asset is revalued , the provision for
depreciation is based on the revalued amount.
*A change in method of depreciation is treated as
change in an accounting policy.
*Accumulated Depreciation for each class of asset
13. *Any addition or extension becomes an integral part
of the existing asset. Hence it is depreciated over the
remaining useful life of the asset.
*Depreciation on Items Below Rs 5000/-
*Schedule 2 of Company Act 2013, individual items of
fixed assets below Rs. 5000. There is no such
concept.
14. *When the depreciable asset is disposed off,
discarded, demolished, destroyed; the net surplus or
deficit is charged to P/L A/C.
*The useful life of a depreciable asset should be
estimated after considering factors like wear & tear,
obsolescence etc.
*The useful life of major depreciable assets may be
periodically reviewed.
15. *Increase or Decrease in long term liability on account
of exchange fluctuations, price adjustments etc, the
depreciation should be provided prospectively.
*But when there is a change in historical cost due to
revaluation, depreciation should be charged on the
basis of revalued amount & on the estimate of the
remaining useful life of such assets.
