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TMI BlogDepreciation and amortizationX X X X Extracts X X X X X X X X Extracts X X X X ..... e in cost statements. 2. Objective The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the Depreciation and Amortisation with reasonable accuracy. 3. Scope This standard shall be applied to cost statements which require measurement, assignment, presentation and disclosure of Depreciation and Amortisation, including those requiring attestation. 4. Definitions The following terms are being used in this standard with the meaning specified:- 4.1 Amortisation: Amortisation is the systematic allocation of the depreciable amount of an intangible asset over its useful life. It refers to expensing the acquisition cost minus the residual value of intangible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set is its historical cost, or other amount substituted for historical cost in the financial statements, less the estimated residual value. 4.6 Depreciable fixed and Intangible assets are assets which: (i) are expected to be used during more than one accounting period; (ii) have a limited useful life; and (iii) are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business. Land is not a depreciable asset as it does not have a defined useful life. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed shall not be less than the amount calculated as per principles and methods as prescribed by any law or regulations applicable to the entity and followed by it. 5.2 In case of regulated industry the amount of depreciation shall be the same as prescribed by the concerned regulator. 5.3 While estimating the useful life of a depreciable asset, consideration shall be given to the following factors: (a) Expected physical wear and tear; (b) Obsolescence; and (c) Legal or other limits on the use of the asset. 5.4 The useful life of an intangible asset that arises from contractual or other lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the remaining useful life of that asset. 5.7 Depreciation of any addition or extension to an existing depreciable asset which retains a separate identity and is capable of being used after the expiry of the useful life of that asset shall be based on the estimated useful life of that addition or extension. 5.8 The impact of higher depreciation due to revaluation of assets shall not be assigned to cost object. 5.9 Impairment loss on assets shall be excluded from cost of production. 5.10 The method of depreciation used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity. 5.11 An entity can use any of the methods of depreciation to assign depreciable amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al statements, depreciation of the asset for assigning to cost of object shall be measured in relation to the period, the asset actually utilized. 6. Assignment of Costs 6.1 Depreciation shall be traced to the cost object to the extent economically feasible. 6.2 Where the depreciation is not directly traceable to cost object, it shall be assigned based on either of the following two principles: i. Cause and effect - cause is a process or operation or activity and effect is the incurrence of cost. ii. Benefits received - depreciation is to be apportioned to the various cost objects in proportion to the benefits received by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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