From Published Accounts

Compilers’ Note:
Schedule II to the Companies Act, 2013 lays down the recommended useful lives and residual value to compute depreciation for tangible assets. It also provides that if a company adopts a useful life different from what is specified in Schedule II or uses a different residual value, the financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice. Schedule II also requires that where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately (component approach).

Following Schedule II as against the erstwhile Schedule XIV to the Companies Act, 1956 will, in most cases, result in changes in the amount of depreciation provision from the minimum rates prescribed by the erstwhile Schedule XIV. ICAI has issued an Application Guide to the provisions of Schedule II to the Companies Act, 2013.

Given below are some illustrative disclosures on adoption of Schedule II.

Sobha Limited (31-3-2015)

From Significant Accounting Policies
Till the year ended March 31, 2014, Schedule XIV to the Companies Act, 1956, prescribed requirements concerning depreciation of fixed assets. From the current year, Schedule XIV has been replaced by schedule II to the Companies Act, 2013. The applicability of Schedule II has resulted in the following changes related to depreciation of fixed assets.

i. Useful lives/depreciation rates
Till the year ended March 31, 2014, depreciation rates prescribed under Schedule XIV were treated as minimum rates and the Company was not allowed charge depreciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act, 2013 prescribes useful lives for fixed assets which, in many cases, are different from lives prescribed under the erstwhile Schedule XIV. However, Schedule II allows companies to use higher/lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements.

Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, though these rates in certain cases are different from lives prescribed under Schedule II. Accordingly, the carrying amount as at April 01, 2014 is being depreciated over the revised remaining useful life of the asset. The carrying value of Rs.16.66 million, in case of assets with Nil revised remaining useful life as at April 01, 2014, is reduced after tax adjustment from the retained earnings as at such date. Further, had the Company continued with the previously assessed useful lives, charge for depreciation for the year ended March 31, 2015 would have been lower by Rs. 96 million and the profit before tax for the year ended March 31, 2015 would have been higher by such amount, with a corresponding impact on net block of fixed assets as at March 31, 2015.

ii. Depreciation on assets costing less than Rs.5,000/-
Till year ended March 31, 2014, to comply with the requirements of Schedule XIV to the Companies Act, 1956, the Company was charging 100% depreciation on assets costing less than Rs.5,000/- in the year of purchase. However, Schedule II to the Companies Act 2013, applicable from the current year, does not recognise such practice. Hence, to comply with the requirement of Schedule II to the Companies Act, 2013, the Company has changed its accounting policy for depreciations of assets costing less than Rs. 5,000/-. As per the revised policy, the Company is depreciating such assets over their useful life as assessed by the management. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after April 1, 2014.

The change in accounting for depreciation of assets costing less than Rs. 5,000/- did not have any material impact on financial statements of the Company for the current year.

Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on written down value basis using the following useful lives prescribed under Schedule II, except where specified.

Steel scaffolding items are depreciated using straight line method over a period of 6 years, which is estimated to be the useful life of the asset by the management based on planned usage and technical advice thereon. These lives are higher than those indicated in Schedule II.

Leasehold land where title does not pass to the Company and leasehold improvements are amortised over the remaining primary period of lease or their estimated useful life, whichever is shorter, on a straight-line basis.

TCS Limited (31-3-2015)

From Significant Accounting Policies

Fixed assets
Fixed assets are stated at cost, less accumulated depreciation/amortisation. Costs include all expenses incurred to bring the asset to its present location and condition. Fixed assets exclude computers and other assets individually costing Rs. 50,000 or less which are not capitalised except when they are part of a larger capital investment programme.

Depreciation/amortisation
In respect of fixed assets (other than freehold land and capital work-in-progress) acquired during the year, depreciation/amortisation is charged on a straight line basis so as to write-off the cost of the assets over the useful lives and for the assets acquired prior to April 1, 2014, the carrying amount as on April 1, 2014 is depreciated over the remaining useful life based on an evaluation.

Fixed assets purchased for specific projects are depreciated over the period of the project or the useful life stated above, whichever is shorter.

From Notes to Financial Statements

The Company has revised its policy of providing depreciation on fixed assets effective April 1, 2014. Depreciation is now provided on a straight line basis for all assets as against the policy of providing on written down value basis on some assets and straight line basis on others. Further the remaining useful life has also been revised wherever appropriate based on an evaluation. The carrying amount as on April 1, 2014 is depreciated over the revised remaining useful life. As a result of these changes, the depreciation charge for the year ended March 31, 2015 is higher by Rs.131.16 crore and the effect relating to the period prior to April 1, 2014 is a net credit of Rs.528.38 crore (excluding deferred tax of Rs.129.62 crore) which has been shown as an ‘Exceptional Item’ in the statement of profit and loss.

Reliance Industries Limited (31-03-2015)

From Significant Accounting Policies

Tangible Assets
Depreciation on Fixed Assets is provided to the extent of depreciable amount on the Written Down Value (WDV) Method except in case of assets pertaining to Refining segment and SEZ units/developer where depreciation is provided on Straight Line Method (SLM). Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 except in respect of the following assets, where useful life is different than those prescribed in Schedule II are used;

In respect of additions or extensions forming an integral part of existing assets and insurance spares, including incremental cost arising on account of translation of foreign currency liabilities for acquisition of Fixed Assets, depreciation is provided as aforesaid over the residual life of the respective assets.

From Note on Fixed Assets (EXTRACTS)
Pursuant to the enactment of  Companies  Act  2013,  the company has applied the estimated useful lives as specified in Schedule II, except in respect of certain assets as disclosed in Accounting Policy on Depreciation, Amortisation and Depletion. Accordingly the unamortised carrying value is being depreciated / amortised over the revised/ remaining useful lives. The written down value of Fixed Assets whose lives have expired as at 1st April 2014 have been adjusted net of tax, in the opening balance of Profit and Loss Account amounting to Rs.318 crore.

Raymond Limited (31-05-2015)

Method of Depreciation/ Amortisation:

i.    Depreciation on Factory buildings, Plant and machinery, Aircrafts, Electrical installations, and Equipment is provided on a Straight Line  Method and in case of other assets on Written Down Value Method, over the estimated useful life of assets.
ii.    Effective 1st April 2014, the Company  depreciates its fixed assets over the useful life in the manner prescribed in Schedule II of the Act, as against the earlier practice of depreciating at the rates prescribed in Schedule XIV of the Companies Act, 1956.
iii.    Based on independent technical evaluation, the useful life of Plant and Machinery has been estimated as  24 years (on shift basis), which is different from that prescribed in Schedule Ii of the Act.
iv.    In case of pre-owned assets, the useful life is estimated on a case to case basis.
v.    Cost of Technical Know-how capitalised is amortised over a period of six years thereof.
vi.    Cost of Software capitalised is amortised over a period of three years.
vii.    Cost of Leasehold land is amortised over the period of lease.
viii.    Depreciation on additions to assets or on sale/ discardment of assets, is calculated on pro rata from the month of such addition or upto the month of such sale/discardment, as the case may be.

From Note on Fixed Assets (EXTRACTS)
In accordance with the provisions of Schedule II of the Act, in case of fixed assets which have completed their useful life as at 1st April, 2014,  the carrying value (net  of residual value) amounting to Rs.441.10 lakh (net of deferred tax at Rs.227.13 lakh) as a transitional provision has been recognized in the Retained Earnings.

–    Further in case of assets acquired prior to 1st April, 2014, the carrying value of assets (net of residual value) is depreciated over the remaining useful life of as determined effective 1st April, 2014.
–    Depreciation and amortisation expenses for the year would have been higher by Rs.1,380.60 lakh, had the Company continued with the previous assessment of useful life of such assets.

Hindustan Unilever Limited (31-03-2015)

Tangible Assets

Tangible assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditures related to an item of tangible asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Items of tangible assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements under “Other current assets”. Any expected loss is recognised immediately in the Statement of Profit and Loss.

Tangible assets not ready for the intended use on the date of Balance Sheet are disclosed as “Capital work-in- progress”.

Losses arising from the retirement of, and gains or losses arising from disposal of tangible assets which are carried at cost are recognised in the Statement of Profit and Loss.

Depreciation is provided on a pro-rata basis on the straight line method  at  the  rates  prescribed  under  Schedule  II to the Companies Act, 2013  with  the  exception  of the following:
–    plant and equipment is depreciated over 2 to 21 years based on the technical evaluation of useful life done by the management.
–    certain assets lying at salons and training centre, included in plant and equipment, furniture and fixtures and office equipment, are depreciated over five to nine years.
–    assets costing Rs. 5,000 or less are fully depreciated in the year of purchase.

From Note on Fixed Assets (EXTRACTS)
Depreciation of Rs. 11.97 crore on account of assets whose useful life is already exhausted on April 01, 2014 has been adjusted against General Reserve pursuant   to adoption of estimated useful life of fixed assets as stipulated by Schedule II of Companies Act, 2013.

asian paints (31-05-2015)

Depreciation and Amortisation

Depreciation on tangible fixed assets is provided using the Straight Line Method based on the useful life of the assets as estimated by the management and is charged to the Statement of Profit and Loss as per the requirement of Schedule II of the Companies Act, 2013. The estimate of the useful life of the assets has been assessed based on technical advice which considered the nature of the asset, the usage of the asset, expected physical wear and tear, the operating conditions of the asset, anticipated technological changes, manufacturers warranties and maintenance support, etc.

The estimated useful life of Tangible Fixed Assets is mentioned below:

Depreciation on tinting systems leased to dealers, is provided under Straight Line Method over the estimated useful life of nine years as per technical evaluation.

From Note on fixed assets (Extracts)
In accordance with Schedule II of the Companies Act, 2013, the Company has reassessed the estimated useful life of certain class of assets through technical evaluation during the year.  The reassessed estimated useful life    is in line with existing useful life of the assets used by the Company for the purpose of depreciation. This reassessment does not materially impact the financials of the Company.