This document provides guidance on accounting for depreciation in companies according to the Companies Act of India. It discusses the methods of charging depreciation allowed under the Act, the applicability of depreciation rates prescribed in Schedule XIV, adoption of different depreciation methods for different asset types, changing depreciation methods, and other related topics. The key points are:
1) Section 205 of the Companies Act prescribes the methods for charging depreciation, including straight line and written down value methods.
2) Schedule XIV provides minimum depreciation rates that must be used, but companies can use higher rates if justified.
3) Companies have flexibility to use different depreciation methods for different
Karnataka HC endorses tax avoidance technique to lessen minimum alternate tax...D Murali ☆
Karnataka HC endorses tax avoidance technique to lessen minimum alternate tax (MAT) - T. N. Pandey - Article published in Business Advisor, dated June 10, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM #BusinessAdvisorArchives
The document summarizes the key requirements under the Companies Act, 2013 regarding maintenance and filing of books of accounts and financial statements for companies in India. It discusses the requirements for preparation of annual financial statements, board reports, responsibilities of directors, approval and signing of financial statements, circulation to shareholders, filing with the registrar of companies, and penalties for non-compliance.
This document outlines various compliance requirements and deadlines for filing forms under the Companies Act, 2013. It lists 23 different forms that must be filed for events like changes to a company's registered office, allotment of securities, annual returns, financial statements, appointment of directors, and more. The deadlines for filing these forms range from 15 days to 60 days after the relevant event occurs. Failure to meet these deadlines to file the required forms can result in penalties for the company.
20 key suggestions of Tax Reform Panel to Simplify tax provisionsKunal Gandhi
The Tax Reform Panel provided 20 key suggestions to simplify India's tax provisions:
1. Provide legislative guidance on characterizing investments as capital assets or stock-in-trade to reduce litigation. Surplus on shares held over 1 year as capital assets would always be taxed as long-term capital gains.
2. Introduce a presumptive taxation scheme for professionals estimating income at 33.33% of receipts up to 1 crore rupees to simplify compliance.
3. Defer implementation of Income Computation and Disclosure Standards (ICDS) to allow further study of implications as they generate legal debates and increase compliance burden.
This document discusses various annual and ongoing compliance requirements for companies under Indian company law. It outlines requirements such as appointing a whole-time company secretary for companies with a paid-up capital of Rs. 2 crore or more, filing annual financial statements and returns within 30 days of the annual general meeting, maintaining various statutory registers, and event-based compliances for activities like changes to the board of directors or share capital. It emphasizes the importance of compliance and having a systematic approach to ensure all legal obligations are met, noting that failure to comply can result in penalties like companies being struck off the register for not filing returns or accounts for 5 consecutive years.
The document summarizes the key information that must be included in the Board's report according to the Companies Act 2013 and related rules. It lists items that must be mentioned under section 134, other sections of the Act, and various rules. These include details of meetings, directors, auditors' qualifications, related party transactions, CSR activities, and more. The document provides guidance on the format and content required for the Board's report to comply with statutory requirements.
The document outlines the various documents that must be submitted for approval of schemes of amalgamation/arrangement by the Calcutta Stock Exchange (CSE). It lists 20 documents generally required, such as board resolutions, the scheme details, company histories, valuation reports, shareholding details, and financial statements. It also provides additional documents required for specific cases like demergers, companies listed on other exchanges, and schemes involving capital reduction or arrangement with creditors. CSE reserves the right to request further documents or clarification as needed.
The document proposes amendments to IFRS 2 Share-based Payment to address: (1) accounting for vesting conditions on cash-settled share-based payments, (2) classification of share-based payments with net settlement features, and (3) modifications that change cash-settled to equity-settled payments. It seeks comments on the proposals by March 25, 2015. The proposed amendments clarify accounting in these areas and aim to reduce diversity in practice.
Karnataka HC endorses tax avoidance technique to lessen minimum alternate tax...D Murali ☆
Karnataka HC endorses tax avoidance technique to lessen minimum alternate tax (MAT) - T. N. Pandey - Article published in Business Advisor, dated June 10, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM #BusinessAdvisorArchives
The document summarizes the key requirements under the Companies Act, 2013 regarding maintenance and filing of books of accounts and financial statements for companies in India. It discusses the requirements for preparation of annual financial statements, board reports, responsibilities of directors, approval and signing of financial statements, circulation to shareholders, filing with the registrar of companies, and penalties for non-compliance.
This document outlines various compliance requirements and deadlines for filing forms under the Companies Act, 2013. It lists 23 different forms that must be filed for events like changes to a company's registered office, allotment of securities, annual returns, financial statements, appointment of directors, and more. The deadlines for filing these forms range from 15 days to 60 days after the relevant event occurs. Failure to meet these deadlines to file the required forms can result in penalties for the company.
20 key suggestions of Tax Reform Panel to Simplify tax provisionsKunal Gandhi
The Tax Reform Panel provided 20 key suggestions to simplify India's tax provisions:
1. Provide legislative guidance on characterizing investments as capital assets or stock-in-trade to reduce litigation. Surplus on shares held over 1 year as capital assets would always be taxed as long-term capital gains.
2. Introduce a presumptive taxation scheme for professionals estimating income at 33.33% of receipts up to 1 crore rupees to simplify compliance.
3. Defer implementation of Income Computation and Disclosure Standards (ICDS) to allow further study of implications as they generate legal debates and increase compliance burden.
This document discusses various annual and ongoing compliance requirements for companies under Indian company law. It outlines requirements such as appointing a whole-time company secretary for companies with a paid-up capital of Rs. 2 crore or more, filing annual financial statements and returns within 30 days of the annual general meeting, maintaining various statutory registers, and event-based compliances for activities like changes to the board of directors or share capital. It emphasizes the importance of compliance and having a systematic approach to ensure all legal obligations are met, noting that failure to comply can result in penalties like companies being struck off the register for not filing returns or accounts for 5 consecutive years.
The document summarizes the key information that must be included in the Board's report according to the Companies Act 2013 and related rules. It lists items that must be mentioned under section 134, other sections of the Act, and various rules. These include details of meetings, directors, auditors' qualifications, related party transactions, CSR activities, and more. The document provides guidance on the format and content required for the Board's report to comply with statutory requirements.
The document outlines the various documents that must be submitted for approval of schemes of amalgamation/arrangement by the Calcutta Stock Exchange (CSE). It lists 20 documents generally required, such as board resolutions, the scheme details, company histories, valuation reports, shareholding details, and financial statements. It also provides additional documents required for specific cases like demergers, companies listed on other exchanges, and schemes involving capital reduction or arrangement with creditors. CSE reserves the right to request further documents or clarification as needed.
The document proposes amendments to IFRS 2 Share-based Payment to address: (1) accounting for vesting conditions on cash-settled share-based payments, (2) classification of share-based payments with net settlement features, and (3) modifications that change cash-settled to equity-settled payments. It seeks comments on the proposals by March 25, 2015. The proposed amendments clarify accounting in these areas and aim to reduce diversity in practice.
This document provides an overview of various topics related to the Companies Act, 2013 including definitions of key terms, requirements for issuing securities, and conditions for preferential offers. Some of the main points covered are:
- The definition of "securities" refers to the definition in the Securities Contracts (Regulation) Act, 1956 which includes shares, bonds, debentures and other marketable instruments.
- Private companies can issue securities through private placements subject to certain conditions like a maximum of 200 persons in a financial year and a minimum value of Rs. 20,000.
- Preferential offers can be made to select persons and must meet conditions like board approval, shareholder approval and pricing justified by a
The document discusses proposed revisions to Clause 41 of the Equity Listing Agreement which provides the framework for preparation and submission of financial results by listed companies in India. Some key changes proposed include: modifying formats for finance companies; requiring half-yearly consolidated financial statements under certain conditions; mandatory disclosure of book value and cash flow statements half-yearly; and clarifying requirements around last quarter results, impact of accounting policy changes, and committee approval of results. Public comments are solicited on the draft revisions.
The document presents an overview of the Companies (Auditor's Report) Order, 2015, which outlines new reporting requirements for company auditors. It discusses the applicability and exceptions of the Order, changes from the previous 2003 Order, and the specific reporting requirements for auditors regarding issues like fixed assets, inventory, loans, internal controls, statutory dues, and more. The Order aims to enhance transparency through more robust auditing and reporting on key financial and compliance matters by company auditors.
2015 onwards, Annual Returns of ROC have become complicated, cumbersome and detailed. Annual Return itself requires lot many information. Board's Report is required to be supported by number of annexures. An attempt has been made to go through the technicalities.
This document contains a secretarial audit checklist with 75 items to check the company's compliance with various sections of the Companies Act, 1956 regarding maintenance of statutory registers and records, conduct of board and shareholder meetings, appointment of directors and auditors, borrowing limits, related party transactions, and other legal requirements. The checklist includes requirements for registers of members, charges, investments, minutes books, annual returns, share transfers, loans to directors, interested party contracts, and compliances regarding AGMs, EGMs, dividends, borrowings, deposits from public and employees.
CARO 2016 replaced CARO 2015 and expanded the scope of auditor reporting for certain companies. It requires auditors to include additional details in audit reports regarding fixed assets, inventory, loans, deposits, statutory dues, defaults, fund raising, frauds, managerial remuneration and related party transactions. CARO 2016 aims to increase transparency and ensure compliance with Companies Act 2013 provisions on these matters. It places greater responsibilities on auditors to report any non-compliance or irregularities identified.
Annual Return - A presentation done to ICSI Hyderabad Chapter By SAS PartnersSAS Partners
KEY AREAS
Applicable Sections & Rules
Comparison between CA 1956 & 2013
Contents of Annual Return
Signing of Annual Return
Certification
Due date for filing with Roc
Non Compliance
Liability on Company Secretaries
MGT – 9 Extract to Board’s Report
Key Definitions
The document provides guidance on preparing, filing, and certifying the Annual Return for companies in India. It defines key terms and explains that the Annual Return contains important company information like registered office details, shareholding patterns, board and committee meetings, and remuneration. It must be filed within 60 days of the AGM and certified by a Company Secretary for listed or large companies. The Annual Return gives stakeholders a snapshot of the company's status and is important for transparency.
The document summarizes key requirements for financial statements under the Singapore Companies Act, including:
1) Every company must keep proper accounting records and have sufficient internal controls. Records must be kept for 5 years and be available for director inspection.
2) Directors must present annual financial statements and, for parent companies, consolidated statements at the AGM. Statements must comply with accounting standards and give a true and fair view of the financial position.
3) Dormant companies with assets under $500,000 that receive no notice from shareholders are exempt from preparing financial statements if they file a statement with the registrar.
The document discusses the impact of adopting Indian Accounting Standards (Ind AS) for automobile companies. It covers key areas like revenue recognition, provisions, hedging, securitizations, deferred tax, embedded derivatives, product development costs, and property, plant and equipment. The overview section explains the transition process to Ind AS, including the requirement for an explicit compliance statement, accounting policy choices, and preparation of an opening Ind AS balance sheet. It also discusses exemptions available, such as the use of deemed cost for property valuations and relief from restating cumulative translation differences.
The document discusses the need, emergence and applicability of Indian Accounting Standards (Ind AS). Key points include:
- Ind AS were introduced to converge Indian accounting standards with IFRS issued by IASB.
- Applicability of Ind AS depends on the company's net worth, turnover and whether it is listed or not. Listed companies and large unlisted companies must apply Ind AS from 2016-17 onwards.
- Once a company starts applying Ind AS voluntarily or mandatorily, it must continue to do so for all subsequent financial statements. It must apply Ind AS for both standalone and consolidated financial statements.
ASSESMENT OF THE IMPACT OF IND AS on TelcosHARIT MANKAD
The document discusses the impact of adopting Indian Accounting Standards (Ind AS) for telecom companies in India. Some of the key areas that will be impacted for telecom companies include:
1) Accounting for revenue, spectrum licenses, indefeasible rights of use, property and equipment.
2) Accounting for deferred tax assets and liabilities.
3) Adoption of Ind AS 101 provides exemptions from retrospective application, including the use of fair value as deemed cost for property, plant and equipment.
4) Preparation of an opening Ind AS balance sheet as of the transition date and provision of comparative information will be required.
The document provides an assessment of the impact of adopting Indian Accounting Standards (Ind AS/IFRS) on the e-commerce sector in India.
1. Key areas that will be impacted for e-commerce companies under Ind AS include accounting for revenue, private equity funding, intangible assets, property/equipment, deferred taxes, and financial instruments.
2. E-commerce businesses operate under two main models - the marketplace model and the inventory-based (B2C) model. Accounting differs between these models.
3. Ind AS 101 provides exemptions and exceptions from full retrospective application that e-commerce companies can utilize, such as using carrying values for assets from previous GAAP and not
This document summarizes significant changes introduced in the Companies Act 2017 in Pakistan. Key changes include making incorporation of companies easier, simplifying procedures for altering company documents, reducing compliance requirements for small private companies, increasing the time limit for registering charges on companies, introducing concepts of inactive companies and nominee shareholders, promoting use of technology, introducing new types of companies, strengthening corporate governance rules around board composition and related party transactions, and requiring larger companies to undertake corporate social responsibility initiatives.
The document compares the proposed Companies (Auditor's Report) Order, 2016 (CARO 2016) with the existing CARO 2015. Some key changes proposed in CARO 2016 include:
- Expanding the applicability to include foreign companies.
- Raising the thresholds for certain exempted companies.
- Requiring auditors to report on whether title deeds of immovable property are held in the company's name.
- Lowering the threshold for reporting overdue loans from Rs. 5 lacs to Rs. 1 lac.
- Clarifying reporting requirements on statutory dues and disputes.
- Specifying the commencement date as the date of publication in the official gazette.
This document provides information about an auditor's report, including:
- The duties of an auditor include preparing an audit report for company members, making required disclosures in the report, and giving reasons for qualifications.
- An auditor's report must state whether the financial statements provide a true and fair view of the company's affairs and include comments on various matters like books of account and accounting standards.
- CARO (Companies Auditor's Report Order) places additional reporting requirements on auditors regarding companies' fixed assets, inventories, loans to related parties, internal controls, public deposits, and other financial matters.
This document discusses the Companies Auditor's Report Order, 2016 and provides guidance on its applicability and the matters to be reported by auditors. It specifies that the order is applicable to all companies except for banking, insurance, Section 8, OPCs, small and select private companies. It outlines the regulatory framework and illustrates examples of companies that would be subject to the order. It provides the general approach auditors should take and notes the matters that must be included in the audit report such as fixed assets, inventory, loans, deposits, cost records, statutory dues and others.
This document defines depreciation as the reduction in the value of an asset due to wear and tear, usage, or obsolescence over time. It discusses the allocation of an asset's cost over its useful life, with depreciation being a non-cash expense. Various methods of calculating depreciation are presented, along with factors that determine the depreciation amount such as the asset's cost, useful life, and salvage value. The document also notes disclosure requirements for depreciation in financial statements and regulations around changing depreciation methods.
This document discusses depreciation, including its concept, objectives, causes, and methods. It defines depreciation as the permanent fall in value of fixed assets due to wear and tear from use in business. The objectives of depreciation include calculating proper profits, maintaining the original investment, and providing for asset replacement. Causes include wear and tear, obsolescence, and the passage of time. Common depreciation methods discussed are the straight-line method, declining balance method, and sum of years digits method.
This document provides an overview of various topics related to the Companies Act, 2013 including definitions of key terms, requirements for issuing securities, and conditions for preferential offers. Some of the main points covered are:
- The definition of "securities" refers to the definition in the Securities Contracts (Regulation) Act, 1956 which includes shares, bonds, debentures and other marketable instruments.
- Private companies can issue securities through private placements subject to certain conditions like a maximum of 200 persons in a financial year and a minimum value of Rs. 20,000.
- Preferential offers can be made to select persons and must meet conditions like board approval, shareholder approval and pricing justified by a
The document discusses proposed revisions to Clause 41 of the Equity Listing Agreement which provides the framework for preparation and submission of financial results by listed companies in India. Some key changes proposed include: modifying formats for finance companies; requiring half-yearly consolidated financial statements under certain conditions; mandatory disclosure of book value and cash flow statements half-yearly; and clarifying requirements around last quarter results, impact of accounting policy changes, and committee approval of results. Public comments are solicited on the draft revisions.
The document presents an overview of the Companies (Auditor's Report) Order, 2015, which outlines new reporting requirements for company auditors. It discusses the applicability and exceptions of the Order, changes from the previous 2003 Order, and the specific reporting requirements for auditors regarding issues like fixed assets, inventory, loans, internal controls, statutory dues, and more. The Order aims to enhance transparency through more robust auditing and reporting on key financial and compliance matters by company auditors.
2015 onwards, Annual Returns of ROC have become complicated, cumbersome and detailed. Annual Return itself requires lot many information. Board's Report is required to be supported by number of annexures. An attempt has been made to go through the technicalities.
This document contains a secretarial audit checklist with 75 items to check the company's compliance with various sections of the Companies Act, 1956 regarding maintenance of statutory registers and records, conduct of board and shareholder meetings, appointment of directors and auditors, borrowing limits, related party transactions, and other legal requirements. The checklist includes requirements for registers of members, charges, investments, minutes books, annual returns, share transfers, loans to directors, interested party contracts, and compliances regarding AGMs, EGMs, dividends, borrowings, deposits from public and employees.
CARO 2016 replaced CARO 2015 and expanded the scope of auditor reporting for certain companies. It requires auditors to include additional details in audit reports regarding fixed assets, inventory, loans, deposits, statutory dues, defaults, fund raising, frauds, managerial remuneration and related party transactions. CARO 2016 aims to increase transparency and ensure compliance with Companies Act 2013 provisions on these matters. It places greater responsibilities on auditors to report any non-compliance or irregularities identified.
Annual Return - A presentation done to ICSI Hyderabad Chapter By SAS PartnersSAS Partners
KEY AREAS
Applicable Sections & Rules
Comparison between CA 1956 & 2013
Contents of Annual Return
Signing of Annual Return
Certification
Due date for filing with Roc
Non Compliance
Liability on Company Secretaries
MGT – 9 Extract to Board’s Report
Key Definitions
The document provides guidance on preparing, filing, and certifying the Annual Return for companies in India. It defines key terms and explains that the Annual Return contains important company information like registered office details, shareholding patterns, board and committee meetings, and remuneration. It must be filed within 60 days of the AGM and certified by a Company Secretary for listed or large companies. The Annual Return gives stakeholders a snapshot of the company's status and is important for transparency.
The document summarizes key requirements for financial statements under the Singapore Companies Act, including:
1) Every company must keep proper accounting records and have sufficient internal controls. Records must be kept for 5 years and be available for director inspection.
2) Directors must present annual financial statements and, for parent companies, consolidated statements at the AGM. Statements must comply with accounting standards and give a true and fair view of the financial position.
3) Dormant companies with assets under $500,000 that receive no notice from shareholders are exempt from preparing financial statements if they file a statement with the registrar.
The document discusses the impact of adopting Indian Accounting Standards (Ind AS) for automobile companies. It covers key areas like revenue recognition, provisions, hedging, securitizations, deferred tax, embedded derivatives, product development costs, and property, plant and equipment. The overview section explains the transition process to Ind AS, including the requirement for an explicit compliance statement, accounting policy choices, and preparation of an opening Ind AS balance sheet. It also discusses exemptions available, such as the use of deemed cost for property valuations and relief from restating cumulative translation differences.
The document discusses the need, emergence and applicability of Indian Accounting Standards (Ind AS). Key points include:
- Ind AS were introduced to converge Indian accounting standards with IFRS issued by IASB.
- Applicability of Ind AS depends on the company's net worth, turnover and whether it is listed or not. Listed companies and large unlisted companies must apply Ind AS from 2016-17 onwards.
- Once a company starts applying Ind AS voluntarily or mandatorily, it must continue to do so for all subsequent financial statements. It must apply Ind AS for both standalone and consolidated financial statements.
ASSESMENT OF THE IMPACT OF IND AS on TelcosHARIT MANKAD
The document discusses the impact of adopting Indian Accounting Standards (Ind AS) for telecom companies in India. Some of the key areas that will be impacted for telecom companies include:
1) Accounting for revenue, spectrum licenses, indefeasible rights of use, property and equipment.
2) Accounting for deferred tax assets and liabilities.
3) Adoption of Ind AS 101 provides exemptions from retrospective application, including the use of fair value as deemed cost for property, plant and equipment.
4) Preparation of an opening Ind AS balance sheet as of the transition date and provision of comparative information will be required.
The document provides an assessment of the impact of adopting Indian Accounting Standards (Ind AS/IFRS) on the e-commerce sector in India.
1. Key areas that will be impacted for e-commerce companies under Ind AS include accounting for revenue, private equity funding, intangible assets, property/equipment, deferred taxes, and financial instruments.
2. E-commerce businesses operate under two main models - the marketplace model and the inventory-based (B2C) model. Accounting differs between these models.
3. Ind AS 101 provides exemptions and exceptions from full retrospective application that e-commerce companies can utilize, such as using carrying values for assets from previous GAAP and not
This document summarizes significant changes introduced in the Companies Act 2017 in Pakistan. Key changes include making incorporation of companies easier, simplifying procedures for altering company documents, reducing compliance requirements for small private companies, increasing the time limit for registering charges on companies, introducing concepts of inactive companies and nominee shareholders, promoting use of technology, introducing new types of companies, strengthening corporate governance rules around board composition and related party transactions, and requiring larger companies to undertake corporate social responsibility initiatives.
The document compares the proposed Companies (Auditor's Report) Order, 2016 (CARO 2016) with the existing CARO 2015. Some key changes proposed in CARO 2016 include:
- Expanding the applicability to include foreign companies.
- Raising the thresholds for certain exempted companies.
- Requiring auditors to report on whether title deeds of immovable property are held in the company's name.
- Lowering the threshold for reporting overdue loans from Rs. 5 lacs to Rs. 1 lac.
- Clarifying reporting requirements on statutory dues and disputes.
- Specifying the commencement date as the date of publication in the official gazette.
This document provides information about an auditor's report, including:
- The duties of an auditor include preparing an audit report for company members, making required disclosures in the report, and giving reasons for qualifications.
- An auditor's report must state whether the financial statements provide a true and fair view of the company's affairs and include comments on various matters like books of account and accounting standards.
- CARO (Companies Auditor's Report Order) places additional reporting requirements on auditors regarding companies' fixed assets, inventories, loans to related parties, internal controls, public deposits, and other financial matters.
This document discusses the Companies Auditor's Report Order, 2016 and provides guidance on its applicability and the matters to be reported by auditors. It specifies that the order is applicable to all companies except for banking, insurance, Section 8, OPCs, small and select private companies. It outlines the regulatory framework and illustrates examples of companies that would be subject to the order. It provides the general approach auditors should take and notes the matters that must be included in the audit report such as fixed assets, inventory, loans, deposits, cost records, statutory dues and others.
This document defines depreciation as the reduction in the value of an asset due to wear and tear, usage, or obsolescence over time. It discusses the allocation of an asset's cost over its useful life, with depreciation being a non-cash expense. Various methods of calculating depreciation are presented, along with factors that determine the depreciation amount such as the asset's cost, useful life, and salvage value. The document also notes disclosure requirements for depreciation in financial statements and regulations around changing depreciation methods.
This document discusses depreciation, including its concept, objectives, causes, and methods. It defines depreciation as the permanent fall in value of fixed assets due to wear and tear from use in business. The objectives of depreciation include calculating proper profits, maintaining the original investment, and providing for asset replacement. Causes include wear and tear, obsolescence, and the passage of time. Common depreciation methods discussed are the straight-line method, declining balance method, and sum of years digits method.
This document discusses various methods of depreciation for fixed assets. It defines depreciation as the allocation of the cost of a fixed asset over its useful life. Common causes of depreciation include physical deterioration, obsolescence, depletion, and passage of time. Popular depreciation methods include straight-line, reducing balance, revaluation, units-of-output, double-declining balance, and sum-of-the-years'-digits. Each method calculates depreciation expense differently, with advantages and disadvantages to consider.
This document discusses key differences between Indian GAAP and Ind AS accounting standards regarding accounting for property, plant, and equipment. It provides an overview of major changes in depreciation methods and useful life calculations between the two standards. Some key differences highlighted include requirements for component accounting, capitalization of replacement costs, treatment of revaluations, and periodic review of depreciation policies under Ind AS. The document also illustrates transitional provisions and calculations for depreciation under the new standards.
This document provides an overview of key provisions related to the appointment of managing directors, whole-time directors, and managers under the Companies Act of India. Some key points include:
1) A managing director must be a company director entrusted with substantial management powers. A whole-time director devotes their whole time to company affairs.
2) Appointments must follow certain rules, such as the appointee already being a company director. Public companies and subsidiaries of public companies require board and shareholder approval.
3) Certain large companies must have a managing/whole-time director or manager. No more than one person can be appointed as manager, while a company can have multiple managing directors
This document discusses managerial remuneration under the Companies Act of 1956 in India. It defines key terms like manager and director. It outlines that the maximum remuneration paid to a manager cannot exceed 11% of a company's profits and discusses how remuneration is calculated, including salaries, allowances, commissions, and other benefits. The total remuneration to a manager cannot exceed 5% of net profits. Remuneration to directors also requires prior government approval and a special resolution.
Lecture notes on scope of total income and residental status under income ta...Dr. Sanjay Sawant Dessai
Lecture notes prepared for the students of Income tax , based on Income tax Act of India 1961. topic covered are Residential status and scope of total income of assessee.
This document discusses the determination of residential status of assessees in India for tax purposes. It defines resident and non-resident individuals and the rules used to determine their status. An individual is a resident if they were in India for 182 days or more in the previous year, or were in India for at least 365 days in the last 4 years and 60 days in the previous year. To be ordinarily resident, they must also meet additional criteria of being resident in 2 of the last 10 years and being in India for at least 730 days in the last 7 years. Anyone who does not meet the basic or additional criteria is considered a non-resident.
This document discusses the rules for determining residential status in India for tax purposes. It covers residential status for individuals, Hindu Undivided Families (HUFs), companies, firms, and associations of persons.
For individuals, residential status depends on the number of days spent in India in the relevant tax year or over the last 4 years. HUFs are resident if control and management is situated wholly or partly in India. Companies are resident if incorporated in India or if control and management is situated wholly in India. Firms and associations are resident if control and management is situated wholly or partly in India.
This document discusses residential status under Indian income tax law. It explains that an individual's tax liability depends on their residential status, which can be resident, non-resident, or ordinarily resident. It also discusses how residential status is determined for individuals, HUFs, firms, companies and other persons. Key factors include number of days present in India and control and management of affairs. The document provides examples to illustrate how residential status is assessed and its implications for taxing different types of income received in or outside of India.
This document discusses accounting standards for depreciation accounting in India. It explains that depreciation is a measure of the wearing out or loss of value of an asset over its useful life. It then describes different methods for calculating depreciation, including straight-line, written down value, and units of production. Journal entries are provided for recording depreciation expense and the disposal of assets. The document concludes by stating that this standard applies to all depreciable assets except certain items, and disclosure of depreciation policies is important.
This document summarizes the key aspects of Accounting Standard AS-6 on depreciation accounting in India. It defines depreciation and explains how it is allocated over the useful life of a depreciable asset. It covers the applicability of AS-6, methods of calculating depreciation, factors affecting depreciation, and disclosure requirements regarding depreciation policies and amounts in financial statements. The document also discusses accounting treatments for changes in depreciation methods or estimates of useful life.
Depreciation is the allocation of the cost of tangible and intangible assets over their useful lives. There are different methods for calculating depreciation under accounting standards in India (AS-6), US GAAP, and IFRS. Key differences include how revaluations are treated and whether changes in estimates are considered changes in accounting policies. Uniformity in depreciation accounting standards worldwide could improve comparability between companies.
The document discusses the calculation of managerial remuneration under the Companies Act 1956. It states that total remuneration to directors, managers, and managing directors cannot exceed 11% of net profits as defined in the Act. Net profits are calculated by taking the gross profit and subtracting/adding certain items as specified. The document also provides details on calculating remuneration in cases of adequate and inadequate profits.
Detailed Audit Programme on Important Areas of Insurance Businesstaxguru5
"As you are aware that an Insurance Company is a company incorporated under provisions of the Companies Act, 1956/2013, licensed under the Insurance Act, 1938 an"
TaxGuru is a platform that provides Updates On Amendments in Income Tax, Wealth Tax, Company Law, Service Tax, RBI, Custom Duty, Corporate Law , Goods and Service Tax etc.
To know more visit https://taxguru.in/corporate-law/detailed-audit-programme-important-areas-insurance-business.html
This document outlines the financial standards a company must meet to qualify for listing. It provides details on an earnings test and a valuation/revenue test.
The earnings test requires a company to have at least $10 million in pre-tax earnings over the last 3 years, including $2 million in each of the last 2 years. For emerging growth companies, the requirement is $10 million over the last 2 years.
The valuation/revenue test can be satisfied by either having over $500 million in market cap, $100 million in revenues, and $25 million in cash flows over the last 3 years, or just having over $500 million in market cap and $100 million in revenues. Emerging growth companies need
The document defines dividends and outlines the legal regime governing dividends in India according to the Companies Act of 1956. It discusses how dividends are declared based on profits, the process for declaring interim and final dividends, requirements for transferring unpaid dividends, and principles related to divisible profits. Key points include:
1) A dividend is a payment made to shareholders from current or past year profits. Companies can retain profits or pay them as dividends.
2) Dividends must be recommended by the board and declared by shareholders. They are paid from current or past profits after accounting for depreciation.
3) Unpaid dividends must be transferred to a special account within 7 days, and un
This document provides guidance on applying the provisions of Schedule II to the Companies Act 2013 regarding depreciation. Some key points:
- Schedule II replaced Schedule XIV and requires depreciation to be computed based on the useful life of assets as defined in Schedule II.
- Useful life is the period over which an asset is expected to be used, or the number of production units from the asset. Residual value cannot exceed 5% of original cost.
- The transitional provision requires assets' remaining useful life to be used to calculate depreciation from April 1, 2014, or amounts above residual value to be charged to retained earnings.
- Components with different useful lives must be depreciated separately.
Race against deadline for companies eager to declare interim dividendTaxmann
The companies suddenly seem to be in a rush to declare interim dividend. The driving reason behind this rush lies in the amendments inserted in the Finance Bill, 2016.
Amendments in Schedule III of Companies Act, w.e.f. 1st April 2022taxguru5
"CA Pragathi Gudur* With the ever-increasing stringency in the regulatory framework and disclosure requirements under various provisions of law, MCA, vide notifi"
TaxGuru is a platform that provides Updates On Amendments in Income Tax, Wealth Tax, Company Law, Service Tax, RBI, Custom Duty, Corporate Law , Goods and Service Tax etc.
To know more visit https://taxguru.in/company-law/amendments-schedule-iii-companies-act-w-e-f-1st-april-2022.html
The Payment of Bonus act, 1965. this PPT has inclusion recent amendments and is done from the view point of students. If anything has been missed out, do let us know through comments.
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Amendments in Schedule III of Companies Act, w.e.f. 1st April 2022taxguru5
"CA Pragathi Gudur* With the ever-increasing stringency in the regulatory framework and disclosure requirements under various provisions of law, MCA, vide notifi"
TaxGuru is a platform that provides Updates On Amendments in Income Tax, Wealth Tax, Company Law, Service Tax, RBI, Custom Duty, Corporate Law , Goods and Service Tax etc.
To know more visit https://taxguru.in/company-law/amendments-schedule-iii-companies-act-w-e-f-1st-april-2022.html
This document outlines requirements for listed entities in India regarding schemes of arrangement, such as mergers and demergers. It discusses obligations of listed entities and stock exchanges with respect to scheme documentation, valuation reports, shareholder approval, and regulatory review and approval. Key requirements include submitting draft schemes and supporting documents to stock exchanges, obtaining necessary approvals including from shareholders, addressing any complaints received, and obtaining observation letters from stock exchanges and comments from the Securities and Exchange Board of India (SEBI). The aim is to ensure schemes are transparent and in compliance with all applicable regulations.
This document outlines Accounting Standard 20 which provides guidance on calculating and disclosing earnings per share (EPS) in accordance with Indian accounting standards.
It applies to companies whose shares are listed on a stock exchange in India and any unlisted company that voluntarily discloses EPS. Basic EPS is calculated by dividing net profit by the weighted average number of outstanding shares. Diluted EPS further considers any dilutive effects from potential ordinary shares.
The standard provides detailed rules around calculating the weighted average number of shares, handling bonus issues, rights issues, and other corporate actions that impact the number of shares outstanding over time. It aims to improve comparability of EPS between periods and companies.
This document discusses provisions around carry forward and set off of accumulated losses and unabsorbed depreciation allowances for companies undergoing amalgamation or demerger according to the Income Tax Act of 1961. It provides details on the conditions that must be met, such as the amalgamating company being financially unviable and the amalgamation being in the public interest. It also discusses similar provisions for firm successions and changes in constitution, as well as restrictions for certain types of companies.
The document provides a comprehensive table summarizing the various monetary limits and exemptions specified in the Companies Act, 2013. It lists out key terms such as paid-up capital, reserves, net worth, turnover, and profits and the limits defined for them in different sections of the Act. It also notes certain sections that allow scope for different interpretations regarding these terms and limits. The table covers 8 items, explaining the applicable limits and exemptions for provisions related to definitions, small companies, subsidiaries, and voluntary conversion of One Person Companies.
Revised Formats for Financial Results Sebi latest GAURAV KR SHARMA
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Comparative summary of CARO 2016 vs CARO 2020taxguru5
"Companies (Auditor's Report) Order, 2020 The Companies Act, 2013 requires auditors of specified class of companies to include a statement in their reports on"
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The budget document summarizes key changes for salaried individuals, taxation of long term capital gains (LTCG), business income, international taxation, and miscellaneous items. For salaried taxpayers, deduction limits for medical expenses and interest income were increased. LTCG will now be taxed at 10% for gains over Rs. 1 lakh. Business income rules were expanded and tax rates increased for large companies. International tax provisions now include a broader definition of permanent establishment and taxing digital businesses based on economic presence in India. Various deductions and exemptions were also introduced or modified.
This document lists 20 documents that must be submitted for scheme of amalgamation or arrangement cases to the Calcutta Stock Exchange (CSE). It includes documents such as board resolutions approving the scheme, the scheme details, company histories, valuation reports, shareholding details, financial statements, and undertakings. Additional documents are required for specific cases like demergers, companies listed on other exchanges, and schemes involving capital reduction or arrangements with creditors. The CSE reserves the right to request additional documents or clarifications as needed.
NO. FJ2 (49)/2021-LEGIS) THE LEGISLATION WAS RECEIVED ON DECEMBER 1, 2021 AFTER BEEN APPROVED BY THE PARLIAMENT HEREAFTER PROMULGATED ON DECEMBER 04, 2021 CALLED AS THE COMPANIES (AMENDMENT) ACT, 2021.
Executive Directors Chat Leveraging AI for Diversity, Equity, and InclusionTechSoup
Let’s explore the intersection of technology and equity in the final session of our DEI series. Discover how AI tools, like ChatGPT, can be used to support and enhance your nonprofit's DEI initiatives. Participants will gain insights into practical AI applications and get tips for leveraging technology to advance their DEI goals.
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Main Java[All of the Base Concepts}.docxadhitya5119
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The simplified electron and muon model, Oscillating Spacetime: The Foundation...RitikBhardwaj56
Discover the Simplified Electron and Muon Model: A New Wave-Based Approach to Understanding Particles delves into a groundbreaking theory that presents electrons and muons as rotating soliton waves within oscillating spacetime. Geared towards students, researchers, and science buffs, this book breaks down complex ideas into simple explanations. It covers topics such as electron waves, temporal dynamics, and the implications of this model on particle physics. With clear illustrations and easy-to-follow explanations, readers will gain a new outlook on the universe's fundamental nature.
This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
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Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
1. Guidance Note on Accounting for Depreciation in Companies1<br />Introduction<br />1. The Council of the Institute of Chartered Accountants of India has issued Accounting Standard (AS) 6 on 'Depreciation Accounting'. This standard lays down general principles of accounting for depreciation applicable to all entities. As such, the Standard is applicable to companies also in matters where there are no specific requirements under the Companies Act. AS 6 also provides that the statute governing an enterprise may provide the basis for computation of depreciation. In such a situation, the requirements of the statute have to be complied with. Thus, in case of companies, section 205 and 350 of the Companies Act, 1956, which govern provisions regarding charge of depreciation for the purpose of payment of dividends and computation of managerial remuneration, respectively, provide the basis for computation of depreciation. the Companies (Amendment) Act, 1988, has amended section 350, as a consequence to which rates of depreciation prescribed in Income-tax Act, 1961, and the Rules made thereunder are no more relevant as the aforesaid section now provides that the rates of depreciation applicable would be those prescribed in Schedule XIV, which has been inserted in the Act. This Guidance Note on Accounting for Depreciation in Companies is issued by the Research Committee in the context of the aforesaid sections of the Act as well as the Accounting Standard.<br />2. The Council of the Institute and its various committees have issued, from time to time, various pronouncements on the subject of accounting for depreciation, in particular reference to the corporate sector, which are listed below:<br />(a) Guidance Note on Provision for Depreciation [published in Compendium of Guidance Notes, Vol.I (2nd Edition)]<br />(b) Statement On Provision for Depreciation in Respect of Extra or Multiple Shift Allowance [Published in Compendium of Statements and Standards on Accounting, 1st Edition]<br />(c) Statement on Changes in the Mode Of Charging Depreciation in Accounts [Published as an Appendix in the Guide to Company Audit]<br />(d) Guidance Note on Accounting for Depreciation Consequent to Changes in Rates of Depreciation [Published in Compendium of Guidance Notes, Vol. II, 1st Edition]<br />This Guidance Note comes into effect in respect of accounting periods commencing on or after 1st April, 1980. Accordingly, the above Guidance Notes/Statements stand withdrawn from that date.<br />Methods of Charging Depreciation<br />3. Section 205 of the Companies Act, 1956, prescribes the methods of charging depreciation. The relevant extracts thereof are as follows:<br />quot;
(2) ... depreciation shall be provided either-<br />(a) to the extent specified in section 350; or<br />(b) in respect of each item of depreciable asset, for such an amount as is arrived at by dividing ninety five percent of the original cost thereof to the company by the specified period in respect of such asset; or<br />(c) on any other basis approved b y the Central Government which hasthe effect of writing off by way of depreciation ninety five per cent of the original cost to the company of each such depreciable asset on the expiry of the specified period; or<br />(d) as regards any other depreciable, asset for which no rate of depreciation has been laid down by this Act or rules made thereunder, on such basis as may be approved by the Central Government by the general order published in the Official Gazette or by any special order in any particular case:<br />Provided that where depreciation is provided for in the, manner laid down in clause (b) or clause (c), then, in the event of the depreciable asset being sold, discarded, demolished or destroyed the written down value thereof at the end of the financial year in which the asset is sold, discarded, demolished or destroyed, shall be written off in accordance with the proviso to section 350.<br />...........<br />(5) 'Specified period' in respect of any depreciable asset shall mean the number of years at the end of which at least ninety-five per cent of the original cost of the asset to the company will have been provided for by way of depreciation if depreciation were to be calculated in accordance with the provisions of section 350.quot;
<br />4. Note No. 5(i) to Schedule XIV requires that depreciation method(s) used by the company shall be disclosed. Part II of Schedule VI requires that if no provision is made for depreciation, the fact that no provision has been made should be stated and the quantum of arrears of depreciation computed in accordance with section 205(2) of the Act shall be disclosed by way of a note. The Committee is of the view that the company should also disclose the method(s) by which the arrears of depreciation have been computed.<br />Adoption of different methods for different types of assets<br />5. A company may adopt more than one method of depreciation. Thus, it is permissible to follow different methods for different types of assets provided the same methods are consistently adopted from year to year in accordance with Section 205(2). Also, units in different geographical locations can follow different methods of depreciation provided the same are consistently followed.<br />Change in the method of providing depreciation<br />6. The depreciation method selected should be applied consistently from period to period. A change from one method of providing depreciation to another should be made only if the adoption of the new method is required by statute or for compliance with an accounting standard or if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise. 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 use2. The deficiency or surplus arising from the retrospective recomputation of depreciation in accordance with the new method would be adjusted in the accounts in the year in which the method of depreciation is changed. In case the change in the method results in deficiency in depreciation in respect of past years, the deficiency should be charged to the profit and loss account. In case the change in the method results in surplus, it is recommended that the surplus be initially transferred to the 'Appropriations' part of the profit and loss account and thence to General Reserve through the same part of the profit and loss account. Such a change should be treated as a change in accounting policy and its effects should be quantified and disclosed.<br />Relevant rates of depreciation for the purpose of preparation of accounts of a company<br />7. Section 205 of the Companies Act requires that no dividend shall be declared or paid by a company except out of the profits of the company arrived at after providing for depreciation in accordance with the provisions of sub-section 2 of that section. This sub-section allows the company to provide for depreciation either in the manner specified in Section 350 of the Act or in the alternative manners specified in that sub-section itself. Part II of Schedule VI further provides that if no provision for depreciation is made, the fact that no provision has been made shall be stated and the quantum of arrears of depreciation computed in accordance with Section 205(2) of the Act shall be disclosed by way of a note.<br />8. A question may arise as to whether it is obligatory on a company to provide for depreciation only on the basis mentioned in Section 205(2) read with section 350 and Schedule XIV of the Act or whether these bases can be considered as indicating the minimum depreciation which must be provided by the company, insofar as the accounts of the company are concerned and insofar as it is required to exhibit a true and fair view of the state of affairs of the company as on a given date and of the profit or loss for the year.<br />9.The Committee is of the view that in arriving at the rates at which depreciation should be provided the company must consider the true commercial depreciation, i.e., the rate which is adequate to write off the asset over its normal working life. If the rate so arrived at is higher than the rates prescribed under Schedule XIV the company should provide depreciation at such higher rate but if the rate so arrived is lower than the rates prescribed in Schedule XIV, then the company should provide depreciation at the rates prescribed in Schedule XIV, since these represent the minimum rates of depreciation to be provided. Since the determination of commercial life of an asset is a technical matter, the decision of the Board of Directors based on technological evaluation should be accepted by the auditor unless he has reason to believe that such decision results in a charge which does not represent true commercial depreciation. In case a company adopts the higher rates of depreciation as recommended above, the higher depreciation rates/lower lives of the assets must be disclosed as required in Note no. 5 of Schedule XIV to the Companies Act, 1956.<br />10. This view is supported by the Department of Company Affairs and it has clarified that quot;
the rates as contained in Schedule XIV should be viewed as the minimum rates, and, therefore, a company will not be permitted to charge depreciation at rates lower than those specified in the Schedule in relation to assets purchased after the date of applicability of the Schedule. If, however, on the basis of bona fide technological evaluation, higher rates of depreciation are justified, they may be provided with proper disclosure by way of a note forming part of annual accounts3.<br />11. The Committee is, however, of the view that in respect of assets existing on the date of Schedule XIV coming into force, and where the company is following the Circular of the Department of Company Affairs bearing No.1/86, dated 21st May, 1986, whereby depreciation under straight line method was worked out based on depreciation rates in force under Income tax Act, 1961 and Rules made thereunder at the time of the acquisition of the asset, it would be permissible to the company to follow Circular no. 1/86, dated 21st May, 1986. An appropriate note will be required to be given in this regard.<br />12. Schedule XIV requires that where the concern has worked extra shift, the multiple or extra shift depreciation will have to be provided on the plant and machinery, wherever applicable. In this regard, various units/departments/mills/factories should be taken as separate concerns. In cases where depreciation has not been provided in respect of extra or multiple shift allowance, it will be necessary for the auditor to quality his report accordingly. An example of the qualification is given below:<br />quot;
Depreciation in respect of extra or multiple shift allowance amounting to rupees ............. has not been provided which is contrary to the provisions of Schedule XIV to the Companies Act. This has resulted in the profit being overstated by Rs ............... and plant and machinery overstated by Rs ..............quot;
<br />13. It has been argued that the SLM rates (corresponding to the WDV rates as per Schecule XIV) can be different than those prescribed under Schedule XIV, provided the company continues to determine the rates as provided under section 205. For instance, against the SLM rate of 11.31 (triple shift rate for general plant and machinery) prescribed in Schedule XIV, a company can charge depreciation at the rate of 10.56%. It may be mentioned that the rate of 11.31% has been determined on the basis of 8 years and 6 months or so of specified period whereas 10.56% is arrived at if 95% of the cost of the asset is divided by 9 years. It is argued that for calculating the SLM rates complete years have to be taken into account whereas the rates under Schedule XIV also take into account fractions of years.<br />14. The Committee is of the view that a company should provide SLM instead of holding the contention that fractions of years can be ignored. This view is supported by Department of Company Affairs, as per its Circular No. 2/89, dated March 7, 1989.<br />Applicability of the rates prescribed in Schedule XIV to assets existing on the date on which Schedule XIV came into force.<br />15. Applicability of the rates prescribed in Schedule XIV to existing assets would depend upon whether the company has been charging depreciation on its assets as per the written down value method or the straight line method.<br />16. Where a company has been following the written down value method of depreciation in respect of its assets, the WDV rates prescribed in Schedule XIV should be applied to the written down value as at the end of the previous financial year as per the books of the company.<br />17. Where a company has been following the straight line basis of depreciation in respect of its assets the position prevailing at present is discussed hereunder.<br />18. In January, 1985, the Department of Company Affairs issued a circular dated 10.1. 1985 (enclosed as Annexure II). In this Circular, the Government recognised the need for recalculating the specified period consequent to changes in the income tax rates. For determining depreciation consequent upon changes in the income tax rates it recommended the following method:-<br />(i) As far as recomputation of specified period is concerned, the specified period be recomputed by applying to the original cost, the revised rate of depreciation as prescribed under Income-tax Rules.<br />(ii) As far as charge of depreciation is concerned depreciation be charged by allocating the written down value as per books over the remaining part of the recomputed specified period.<br />19. The Department of Company Affairs issued another Circular (No. 1/86 dated 21st May, 1986, enclosed as Annexure III) wherein it re-examined its earlier circular of 1985. The Department accordingly expressed its view that quot;
once the 'specified period' was determined at the time of purchase of an asset in accordance with the procedure laid down under Section 205(5) read with Section 350 of the Companies Act with reference to the rates of depreciation under the Income-tax Act at that time and the amount of depreciation fixed under section 205(2)(b) of the Companies Act, the same need not be changed subsequently consequent on changes in the rates of depreciation in the Income-tax Act.quot;
The Circular further stated that it was therefore quot;
open to the companies to provide for depreciation under clause (b) of Section 205(2) of the Companies Act on the basis of rates of depreciation prescribed under Income tax Act and in force at the time of acquisition/purchase of the asset.quot;
<br />20. In its Circular No. 2/89 dated March 7, 1989, the Department has reiterated that the companies which follow Circular No. 1/86 quot;
may, therefore, continue to charge depreciation at the old SLM rates in respect of the already acquired assets against which depreciation has been provided in earlier years on SLM basis.quot;
<br />21. The Committee is of the view that where a company is following the straight line method of depreciation in respect of its assets existing on the date of Schedule XIV coming into force, it would be permissible to apply the relevant SLM rates prescribed in the said Schedule on the original cost of the assets from the year of the change of rates.<br />22. The Committee is accordingly of the view that where a company has been following straight line method of depreciation in respect of its assets existing on the date of Schedule XIV coming into force, the following alternative bases may be adopted for computing the depreciation charge:<br />(a) Where a company follows the manner of charging depreciation recommended by the Department of Company Affairs in its Circular No. 1/85, it has to change its depreciation rates as follows :<br />(i) The specified period should be recomputed by applying to the original cost, the revised rate as prescribed in Schedule XIV;<br />(ii) depreciation charge should be calculated by allocating the unamortized value as per the books of account over the remaining part of the recomputed specified period.<br />(b) A company which follows the Circular No. 1/86, can continue to charge depreciation on straight line basis at old rates in respect of assets existing on the date on which the new provisions relating to depreciation came into force.<br />(c) SLM rates prescribed in Schedule XIV can be straightaway applied to the original cost of all the assets including the existing assets from the year of change of the rates.<br />23. A company which changes the rates of depreciation should make an appropriate disclosure in its accounts pertaining to the year in which the change is made.<br />Pro-rata depreciation<br />24. Note no. 4 in Schedule XIV to the Companies Act, 1956, prescribes that quot;
where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyedquot;
. The Committee is of the view that a company may group additions and disposals in appropriate time period(s), e.g., 15 days, a month, a quarter ete, for the purpose of charging pro ratadepreciation in respect of additions and disposals of its assets keeping in view the materiality of the amounts involved.<br />25. Where the financial year of a company is more/less than 12 months, a question may arise as to whether the rates of depreciation prescribed in Schedule XIV are to be applied proportionately to the duration of the financial year of the company or the said rates are to be applied as flat rates irrespective of the duration of the financial year. It way be argued that since sections 205 and 350 of the Companies Act, 1956, are in relation to the financial year, the rates prescribed in Schedule XIV are applicable in respect of the financial year of the company, irrespective of its duration. The Committee is, however, of the opinion that in view of the true and fair consideration of preparation of accounts, the rates of depreciation as per Schedule XIV should be applied proportionately taking into consideration the duration of the financial year.<br />Depreciation on low value items<br />26. Prior to the enforcement of the Companies (Amendment) Act, 1988, many companies used to follow the practice of writing off low value items in the year of acquisition, since such a write off was permitted under the Income-tax Act. The limit for such a write off was Rs. 5,000/-. Schedule XIV is, however, silent on this aspect. The Committee is of the view that the concept of materiality should be kept in mind while deciding the amounts to be written off in this regard. For instance, in small companies, the total write off on this basis may be a substantial figure, it may not, therefore, be proper to charge 100% depreciation on low value items. However, in large companies, where the value of assets is very high, it may be proper to charge 100% depreciation on low value items keeping in view the concept of materiality. The Committee recommends that the accounting policy followed by the company in this regard should be disclosed appropriately in the accounts.<br />Computation of managerial remuneration -- whether SLM rates given in Schedule can be used<br />27. The Department of Company Affairs, as per its circular no. 398 CL V, dated April 13, 1989, has stated that quot;
For the purpose of determining net profits of any financial year the amount of depreciation required to be deducted in pursuance of clause (k) of sub section (4) of Section 349 read with Section 350 shall be the amount calculated as per the written down value method at the rate specified in Schedule XIV, on the assets as shown by the books of the Company at the end of the relevant financial yearquot;
. The Committee is of the opinion that the language of Section350 as it stands at present, does not permit the use of the Straight Line Method. The aforesaid section makes reference to 'written down value of the assets' indicating thereby that for the purposes of computation of managerial remuneration, only the WDV method can be used as the SLM rates, by definition, are applicable only to the original cost of the assets and not to the WDV of the assets.<br />Charging of depreciation in case of revaluation of assets<br />28. A question may arise, as to whether the additional depreciation provision required in consequence of revaluation of fixed assets can be adjusted against quot;
Revaluation Reservequot;
which is created by a company by transferring the difference between the revalued figure and the book value of the fixed assets. Depredation is required to be provided with reference to the total value of the fixed assets as appearing in the accounts after revaluation. However, for certain statutory purposes e.g., dividends, managerial remuneration etc., only depreciation relatable to the historical cost of the fixed assets is to be provided out of the current profits of the company. In the circumstance, the additional depreciation relatable to revaluation may be adjusted against quot;
Revaluation Reservequot;
by transfer to Profit and Loss Account. In other words, as per the requirements of Part II of Schedule VI to the Companies Act, the company will have to provide the depreciation on the total book value of the fixed assets (including the increased amount as a result of revaluation) in the Profit and Loss Account of the relevant period, and thereafter the company can transfer an amount equivalent to the additional depreciation from the Revaluation Reserve. Such transfer from Revaluation Reserve should be shown in the Profit and Loss Account separately and an appropriate note by way of disclosure would be desirable. Such a disclosure would appear to be in consonance with the requirement of Part I of Schedule VI to the Companies Act, prescribing disclosure of write-up in the value of fixed asset for the first five years after revaluation.<br />29. If a company has transferred the difference between the revalued figure and the book value of fixed assets to the quot;
Revaluation Reservequot;
and has charged the additional depreciation related thereto to its Profit and Loss Account, it is possible to transfer an amount equivalent to accumulated additional depreciation from the revaluation reserve to the Profit and Loss Account or to the General Reserve provided suitable disclosure is made in the accounts as recommended in this guidance note.<br />30. The Revaluation Reserve is not available for payment of dividends. This view is also supported by the Companies (Declaration of Dividend out of Reserves) Rules, 1975. Similarly, accumulated losses or arrears of depredation should not be set off against Revaluation Reserve. However, the revaluation reserve can be utilised for adjustment of the additional depreciation on the increased amount due to revaluation from year to year or on the retirement of relevant fixed assets (as discussed in paragraphs 28 and 29 above respectively).<br />31. The revaluation of fixed assets is normally done in order to bring into books the replacement cost of such assets. This is a healthy trend as it recognises the importance of retaining sufficient funds through additional depreciation in the business for replacement of fixed assets. As such, it will be prudent not to charge the additional depreciation against revaluation reserve, though the charge of additional depreciation against revaluation reserve is not prohibited as discussed in paragraphs 28 and 29 above. The practice of not charging the additional depreciation against revaluation reserve would also give a more realistic appraisal of the company's operations in an inflationary situation.<br /> <br />ANNEXURE I<br />Circular No.2/89No.1/17/87-CL.V<br />Government of IndiaMinistry of IndustryDepartment of Company AffairsShastri Bhavan, 5th Floor, 'A' WingDr. R. P. RoadNew Delhi-1, the 7.3.1989<br />To<br />All Chambers of Commerce & Industry.<br />Subject:Clarification on the provisions relating to depreciation the Companies Act, 1956, as amended by the Companies (Amendment) Act, 1988.<br />Dear Sirs,<br />This Department has been receiving queries from different quarters on the subject mentioned above, from time to time, and, accordingly, the following clarifications are issued:-<br />(1) Date on which the new provisions relating to depreciation become effective:<br />The Companies (Amendment) Act, 1988 specifically provides that Schedule XIV shall be deemed to have come into force on 2-4-1987. The amended provisions of Section 205 and 350 of the Act have come into force on 15-6-1988 by virtue of the notification issued by this Department. A question, therefore, arises whether depreciation can be charged on assets on the basis of the rates provided m Schedule XIV for accounting year ending between 2nd April, 1987 and 14th June, 1988.<br />In view of the intention of the legislature behind the amendments in sections 205 and 350 of the Act, the amended provisions have come into force w.e.f 2-4-1987.<br />(2) Recomputation of specified period:<br />It is stated that in 1986, the Department had issued a circular stating that specified period once determined may not be recomputed. Accordingly, the Department has advised the companies that it was open for them not to recompute the specified period even when there is change in the rates of depreciation later on (as against the position of the Department's earlier circular of 1985 on the subject). It is argued that as far as the existing assets are concerned, the companies can follow either of the two circulars. An option under the 1986 circular would thus be available to the companies as at present not recomputing the specified period where the Straight Line Method is used. In other words, where a company decides to follow the 1986 circular, assets on which SLM depreciation was being charged can continue to be depreciated at old SLM rates.<br />In view of this Department's Circular No. 1 of 1986 (No. 1/1/86 CL.V), dated 21.5.1986, specified period once determined may not be recomputed. The companies which follow this circular may, therefore, continue to charge depreciation at the old SLM rates in respect of the already acquired assets against which depreciation has been provided in earlier years on SLM basis.<br />(3) Can higher rates of depreciation be charged?<br />It is stated that Schedule XIV clearly states that a company should disclose depreciation rates if they are different from the principal rates specified in Schedule. On this basis, it is suggested that a company can charge depreciation at rates which are lower or higher than those specified in Schedule XIV.<br />It may be clarified that the rates as contained in Schedule XIV should be viewed as the minimum rates, and, therefore, a company shall not be permitted to charge depreciation at rates lower than those specified in the Schedule in relation to assets purchased after the date of applicability of the Schedule. However, if on the basis of a bonafide technological evaluation, higher rates of depreciation are justified, they may be provided with proper disclosure by way of a note forming part of annual accounts.<br />(4) Can SLM rates be different than those specified under Schedule XIV?<br />It is stated that SLM rates (corresponding to the WDV rates as per Schedule XIV) can be different than those prescribed under Schedule XIV provided a company continues to determine the rates as provided under Section 205. Thus, against the SLM rates prescribed under Schedule XIV of 11.31% (triple shift rate for general plant and machinery), a company can charge depredation at the rate of 10.56%. It may be mentioned that the rate of 11.31% has been determined on the basis of 8 years and 6 months or so of specified period whereas if 95% is divided by 9 years, the corresponding SLM rate comes to 10.56%. The argument is that for calculating the SLM rates complete years have to be taken into account whereas the rates under Schedule XIV also take into account fractions of years.<br />It is clarified that a company must necessarily provide SLM depreciation on the rates prescribed under Schedule XIV and the interpretation that fractions of years cannot be taken into account is not correct.<br />Yours faithfully,U. P. MathurDirector<br /> <br />ANNEXURE II<br />Circular No.1/85No.1/1/85 CL.V No.15/50/84-CL.VI<br />Government of IndiaMinistry of Industry and Company AffairsDepartment of Company Affairs, New Delhi-1, dated the 10.1.1985<br />To<br />All the Chambers of Commerce<br />Subject:Determination of Depreciation under Section 205(2)(b) of the Companies Act, 1956 consequent upon changes in the Income tax Rates introduced by Finance Act, 1983.<br />Dear Sirs,<br />I am directed to say that during the year 1983, the rates of depreciation under Income-tax Act have been changed on some of the assets. As the depreciation provision in the annual accounts of the Companies Act, 1956 is related to the rates of depreciation as provided in the Income-tax Act, any change in the rates under Income-tax Act affects the provision of depreciation in the annual accounts of the companies. As a result, this Department has received several queries/representations from companies enquiring as to what procedure they should adopt for charging depreciation on straight line method on the assets purchased earlier to the change in the rates of depreciation as provided in the Income-tax Act.<br />2. This issue has been examined in this Department and it has been decided that under sub-section (5) of Section 205, quot;
specified periodquot;
for providing depreciation straight line method under clause (b) of sub section (2) of Section 205 has to be recalculated on the basis of the revised rates under Income-tax Act. The companies which adopt the straight line method of depreciation should provide for the depreciation in their annual accounts on the following basis:<br />(a) No. of years for which asset has already been depreciated, before the change in depreciation rate<br />Say, 'A' years<br />(b) Specified period calculated at revised rates by which 95% of the original cost of asset would have depreciated on written down value method at revised rates.<br />Say, 'B' years<br />(c) Written down value of the asset in the books at the beginning of the year in which rates have been changed under I.T. Act.<br />Say, Rs. 'X'<br />(d) 5% of the original cost<br />Say, Rs. 'Y'<br />(e) Fixed instalments of depreciation to be provided each year after the rate has been changed shall be calculated as per the formula<br />X-Y----B-A<br />If 'A' is greater than B, then the amount (X-Y) may be provided for as depreciation in the year in which rates are changed.<br />3. You are requested to bring the above views of the Department to the notice of your member companies for their information and guidance.<br />Sooraj Kapoor(Joint Director)<br /> <br />ANNEXURE III<br />(Circular No. 1/86)No.1/1/86-CL.V No.15(50) 84-CL.VI<br />Government of India,Ministry of Industry,Department of Company Affairs,Shastri Bhavan, 5th Floor, 'A' WingNew Delhi, the 21-5-1986<br />To<br />All Chambers of Commerce etc.<br />Subject:Determination of depreciation under Section 205 (2)(b) of the Companies Act, 1956 consequent upon changes in Income-tax Rates introduced by Finance Act, 1983.<br />Dear Sirs,<br />I am directed to refer to this Department's Circular of even number dated 10.1.1985 on the above subject and to say that the question of providing depreciation under straight line method and the calculation of specified period, as suggested in the Circular referred to above, has been re-examined. On reconsideration, the Department is of the view that once quot;
specified periodquot;
is determined at the time of purchase of an asset in accordance with the procedure laid down under section 205(5) read with section 350 of the Companies Act with reference to rates of depreciation under Income tax Act at that time and amount of depreciation fixed under section 205(2)(b) of the Companies Act, the sum need not be changed subsequently consequent on changes in the rates of depreciation under Income-tax Act. It is, therefore, open to the Companies to provide for depreciation under clause (b) of Section 205(2) of the Comapnies Act on the basis of rates of depreciation prescribed under the Income-tax Act and in force at the time of acquisition of the asset.<br />B. Bhavani SankarJoint Director (Accounts)<br /> <br />1 This Guidance Note also applies to various non-corporate entities to the extent it may be relevant though it has been issued specifically for companies.<br />2 It is hereby clarified that the relevant portion of Accounting Standard (AS) 6 on 'Depreciation Accounting', issued by the Institute of Chartered Accountants of India, is being revised to bring it in line with this recommendation of the Guidance Note.<br />3 Circular No. 2/89, dated March 7, 1989 (Annexure I)<br /> <br />Go to quot;
Guidance Notesquot;
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