Depreciation Policy Changes By Large Technology Companies: Analysis under Indian Accounting Standards

In recent years, a number of large technology firms (for example Meta Platforms, Inc., Microsoft Corporation, Alphabet Inc. (Google) and others) have announced extensions in the useful lives applied to their server and network infrastructure (data-centre hardware) for depreciation purposes. On the face of it, the accounting manoeuvre has the effect of lowering annual depreciation expense, thereby increasing recognised profit, earnings per share (EPS) and various ratios (return on assets, etc.). The key question is: does this practice align with sound accounting principles, especially when economic life (or technological obsolescence) may be much shorter than the extended depreciation period? And if not, what do the applicable Indian standards (Ind AS) say and what risks arise for investors and auditors?

This paper discusses the accounting framework under Indian GAAP / Ind AS for depreciation and useful life, elaborates the concept of “useful life” (economic life) and obsolescence, explains the practice of life-extension for server assets by large tech companies and provides a critical assessment: risks, accounting concerns and whether the practice is consistent with standards. Finally, it examines the implications for Indian-context companies, auditors, and investors.

INTRODUCTION

1. Accoun