The Central Government in consultation with NACAS had notified Companies (Accounting Standards) Amendment Rules 2016 vide notification dated 30th March 2016 in the official gazette and amended the Accounting Standards viz. AS – 2, 4, 10, 13, 14, 21, 29 and omitted the Accounting Standard 6 – Depreciation Accounting.
The Institute of Chartered Accountants of India (ICAI) vide its notification dated 29th September 2016 also amended the accounting standards issued by the ICAI to bring consistency in AS followed by non-corporate entities.
As per the notification, the AS-6 for depreciation accounting shall stand withdrawn and the concept of depreciation is now merged with the AS-10. Therefore, the name of AS-10 has been changed from ‘Fixed Assets’ to ‘Property, Plant & Equipment’. Following are the main features of new AS-10:
- Now, the AS will deal with accounting of PPE except where another AS permits different accounting treatment.
- The standard does not apply to (a) Biological Assets (living animal or plant) related to agricultural activity other than bearer plants. This Standard applies to bearer plants but it does not apply to the produce on bearer plants, for example, Mango tree is a bearer plant and it is covered under AS-10 but the mango grown on this tree will be the produce of Bearer plant and is not covered by this AS; and (b) wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources.
- The cost of PPE is recognized as an asset if and only if entity’s future economic benefits are associated with the asset and the cost of an asset can be measured reliably.
- The initial cost of PPE shall consist of purchase price including import duties, non-refundable purchase taxes, cost directly attributable to bring the asset to the location and condition necessary for it to be used by it in a manner intended by management. The cost also includes initial estimate of dismantling / decommissioning, removing and site restoration.
- The subsequent cost shall include repair and maintenance of the asset or modification to the asset that will lead to increase the capacity and useful life of the asset, improve the quality of output etc.
- Depreciation shall be charged as per Schedule II of the Companies Act 2013 and Guidance Notes thereon i.e. on the basis of useful life of asset.
- Disclosure requirement are as follows:
- Basis of measurement used for determining the gross carrying amount
- Depreciation method used
- Useful lives of the assets or depreciation rates used
- Gross Amount and Accumulated depreciation at beginning and end of the period.
- Addition in Fixed Assets, Revaluations, Impairment Losses, Exchange differences and other movements etc.
The said amendments shall be applicable from 01st April 2017 onwards and hence will be applicable for May-2017 CA Final Examinations. However, the students appearing for November 2016 CA Final examinations need not to worry about these amendments as these are not applicable to them.
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