Amendment in Schedule II

Ministry of Corporate Affairs vide notification dated 29th August 2014 has made amendment in schedule II of the Act related to Useful Lives to Compute Depreciation. The text of the amendment is reproduced as below:-

1. In Schedule II of the Companies Act,20l3, – in Part 'A', in paragraph 3, for sub-paragraph (i), the following sub-paragraph shall be substituted, namely:-

i. The useful life of an asset shall not ordinarily be different from the useful life specified in Part C and the residual value of an asset shall not be more than five per cent. of the original cost of the asset:

Provided that where a company adopts a useful life different from what is specified in Part C or uses a residual value different from the limit specified above, the financial statements shall disclose such different and provide justification in this behalf duly supported by technical advice";

Current text of paragraph 3(i) read as:-

In case of such class of companies, as may be prescribed and whose financial statements comply with the accounting standards prescribed for such class of companies under section 133 the useful life of an asset shall not normally be different from the useful life and the residual value shall not be different from that as indicated in Part C, provided that if such a company uses a useful life or residual value which is different from the useful life or residual value indicated therein, it shall disclose the justification for the same

2. In Schedule II of the Companies Act, 20l3 after Part 'C', under the heading Notes,

For paragraph 4 the following paragraph shall be substituted namely:-

4. (a) Useful life specified in Part C of the schedule is for whole of the asset and 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.

(b) The requirement under sub-paragraph (a) shall be voluntary in respect of the financial year commencing on or after the 1si April, 2014 and mandatory for financial statements in respect of financial years commencing on or after the 1st April, 2015."

Current text of paragraph 4 read as: –

Useful life specified in Part C of the Schedule is for whole of the asset. 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.

For paragraph 7, in sub-paragraph (b) for the words, “shall be recognized”, the words "may be recognized" shall be substituted.

Current text for paragraph 7 read as:

From the date , this Schedule comes into effect, the carrying amount of the asset as on that date –

(a) Shall be depreciated over the remaining useful life of the asset as per this schedule

(b) after retaining the residual value, shall be recognized in the opening balance of retained earnings where the remaining useful life of an asset is nil.

Updates in eforms

1. Version of Form INC-7 is likely to be modified w.e.f. 31st Aug 2014.
2. Form CLSS-2014 will be available for filing w.e.f. 1st September 2014 as per General Circular No. 34/2014.