Section A: Disclosures in quarterly results (Q1 of FY 2014-15) regarding adoption of revised norms for depreciation as per Schedule II of Companies Act, 2013
Compilers’ Note:
The Companies Act, 2013 has, effective 1st April 2014, made it mandatory to apply the revised norms of depreciation as per Schedule II to the Act. Schedule II requires re-assessment of useful life of the tangible fixed assets of a company vis-à-vis the useful life mentioned by the Schedule as well as requires depreciation to be provided on separate components of fixed assets based on the components individual useful life.
Given below are some diverse practices followed by listed companies in their unaudited results (which have been subjected to limited review by the statutory auditors) for the quarter ended 30th June 2014 for calculation of depreciation as per Schedule II. The disclosures are as submitted by the respective companies to the stock exchanges.
Bajaj Auto Limited:
Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing after 1st April 2014, the Company has reworked depreciation with reference to the estimated economic lives of fixed assets prescribed by Schedule II to the Act or actual useful life of assets, whichever is lower. In case of any asset whose life has completed as above, the carrying value, net of residual value, as at st April 2014 has been adjusted to the General Reserve and in other cases the carrying value has been depreciated over the remaining of the revised life of the assets and recognized in the Statement of Profit and Loss.
As a result the charge for depreciation is higher by Rs.16 crore for the quarter ended 30th June 2014.
Century Textiles & Industries Limited
In accordance with the provisions of the Companies Act 2013, effective from 1st April, 2014, the Company has reassessed the remaining useful lives of its fixed assets. As a consequence of such reassessment, the charge for depreciation for the period is lower than the previously applied rates by Rs. 2,822 lakh, correspondingly as the transitional impact of Rs. 2,234 lakh (net of deferred tax Rs.1,151 lakh) has been adjusted to retained earnings.
TVS Motor Company Limited
During the quarter ended 30th June 2014, in accordance with Part A of Schedule II to the Companies Act 2013, the Management, based on Chartered Engineer’s technical evaluation, has reassessed the remaining useful life of assets with effect from 1st April 2014. As a result of the above, depreciation is higher by Rs. 0.71 crore for the quarter ended 30th June 2014. For assets that had completed their useful life as on 1st April 2014, the net residual value of Rs. 2.74 crore has been adjusted to Reserves.
Oberoi Realty Ltd.
The useful life of fixed assets has been revised in accordance with Schedule II to the Companies Act, 2013. The impact of change in useful life of fixed assets on depreciation expense for the quarter amounts to Rs. 323.45 lakh and on opening balance of general reserve amounts to Rs. 33.50 lakh (net of deferred tax).
Reliance Infrastructure Ltd.
During the quarter, the useful life of the fixed assets other than in respect of Electricity business has been revised in accordance with Part C of Schedule II to the Companies Act, 2013. Accordingly depreciation expense for the quarter ended 30th June, 2014 is higher by Rs. 3.88 crore. Similarly, in case of assets whose life has been completed as on 31st March, 2014 the carrying value (net of residual value) of those assets amounting to Rs. 4.75 crore has been debited to General Reserve.
Exide Industries Ltd.
Effective from 1st April, 2014, the Company has charged depreciation based on the revised remaining useful life of the assets as per the requirement of Schedule II of the Companies Act, 2013. Due to the above, depreciation charge for the quarter ended 30th June, 2014 is higher by Rs. 0.55 crore. Further based on transitional provision provided in Note 7(b) of Schedule II, an amount of Rs. 2.41 crore (net of deferred tax) has been adjusted with retained earnings.
PI Industries Ltd.
The useful lives of fixed assets have been revised in accordance with the Schedule II to the Companies Act, 2013 which is applicable from accounting periods commencing on or after 1st April 2014. Accordingly, an amount of Rs. 3.86 crore (net of deferred tax) representing assets beyond their useful life as of 1st April 2014 has been charged to General Reserve and in respect of the remaining assets, an additional depreciation amounting to Rs. 1.55 crore has been charged to the Profit and Loss statement for the current quarter based on residual useful life. Further, in respect of plant and machinery, management is evaluating useful life of certain components, impact of which, if any, would be accounted for in subsequent quarter(s).
Tata Coffee Ltd.
Pending detailed assessment of the useful life and clarification from the Ministry of Corporate Affairs, the depreciation charge for the quarter has been provided as in earlier period. Necessary effect, if required, will be given in the subsequent quarters.
From Limited Review Report
Without qualifying our report, we draw attention to: Note regarding depreciation being provided based on existing method pending evaluation of estimated useful life as required under Schedule II of the Companies Act, 2013.
Thermax Ltd.
Depreciation for the quarter has been computed based on the Company’s evaluation of useful lives of its fixed assets (including significant components thereof, if any) which in certain cases are different from those mentioned in Schedule II to the Companies Act, 2013. The auditors have qualified their report in this regard as in their opinion it is not permissible to have useful lives longer than specified for same class of assets in Schedule II.
From Limited Review Report Basis of Qualified Conclusion
Depreciation for the quarter has been computed based on company’s internal evaluation of useful lives of its fixed assets (including significant components thereof, if any) which in certain cases are more than those mentioned in Schedule II to the Companies Act, 2013. In our opinion useful lives of assets cannot be longer than those indicated in Schedule II. The impact of this on depreciation and profit and loss for the quarter under review has not been computed by the company hence we are unable to comment on the same.
Tata Steel Ltd.
During the quarter, the company and some of its subsidiaries have revised depreciation rate on certain fixed assets as per the useful life specified in the Companies Act, 2013 or re-assessed by the company based on technical evaluation. Accordingly, depreciation of Rs. 136.82 crs (net of deferred tax Rs. 69.64 crore) [Rs. 129.01 crore (net of deferred tax Rs. 66.43 crore) in the stand-alone] on account of assets whose useful life is already exhausted as on 1st April 2014 has been adjusted to retained earnings. Had there been no change in useful life of assets, depreciation for the quarter would have been lower by Rs. 22.74 crore (Rs. 22.33 crore in the stand-alone).
Tata consultancy services ltd.
The group has revised its policy of providing depreciation on fixed assets effective 1st April, 2014. Depreciation is now provided on straight line basis for all assets as against the policy of providing on written down value basis for some assets and straight line basis for others. Further, the remaining useful life has also been revised wherever appropriate based on evaluation. The carrying amount as on 1st april, 2014 is depreciated over the revised remaining useful life. as a result of these changes, the depreciation charge for the quarter ended 30th june, 2014 is higher by rs. 6,063 lakh and the effect relating to the period prior to 1st april, 2014 is not credit of rs. 48,975 lakh (excluding deferred tax of rs. 11,890 lakh) which has been shown as an “exceptional item’ in the statement of profit and loss.
Hindustan Petroleum Corporation Ltd.
Pending the determination of useful life and componentisation of assets, as required under schedule ii of the Companies act, 2013, the company has provided depreciation at the rates and in the manner as prescribed in the schedule XiV of the Companies act, 1956. The impact of the same is not quantified and will be recognised in subsequent quarters. the PSU oil marketing Companies, have made representation to MCA for providing extension to comply with schedule ii of the Companies act, 2013 by mandating application only for annual accounts for 2014-15 and not for quarterly accounts during 2014-15.
From Limited Review Report
As stated in Note No. 5 of the financial results, the company has continued to provide depreciation at the rates and in the manner as prescribed in the schedule XiV of the Companies act, 1956 pending determination of estimated useful life and componentisation of assets as required under schedule ii to the Companies act 2013. As informed to us, the company has also made representation to the ministry of Corporate affairs for providing extension to comply with requirements schedule ii of the Companies act, 2013. The impact of this matter on depreciation and profit for the quarter under review, is not quantified. Hence, we are unable to comment on the same. Based on our review conducted as above, except for the effects of the matter described in the above paragraph, …
Godrej Industries Ltd
Consequent to the enactment of the Companies act, 2013, (the act) and its applicability for accounting periods commencing on or after 1st april, 2014, the Company has adopted the estimated useful life of fixed assets as stipulated by schedule ii to the act, except in the case of plant and machinery where the Company, based on the condition of the plants, regular maintenance schedule, material of construction and past experience, has considered useful life of plant and machinery as 30 years instead of 20 years useful life as prescribed in schedule ii of the act.
Accordingly, the Company has re-worked depreciation with reference to the estimated useful lives of fixed assets as prescribed by schedule ii to the act. in case of assets whose useful life has been completed based on such estimates, the carrying value, net of residual value and taxes, as at 1st april, 2014, amounting to rs. 3.67 crore has been adjusted in the opening balance of retained earnings and in other cases the carrying value is being depreciated over the remaining useful life of the assets and recognised in the Statement of Profit and Loss. As a result of the above mentioned changes, the charge for depreciation is lower by rs. 3.07 crore for the quarter ended 30th june, 2014.
