Depreciation under 2013 & Calculator

1. What are the key changes in Depreciation in CA 2013
The important changes in the Act are as under
• Change from rate based approach to useful life approach and the Act has specified useful lives for various classes of assets

• Schedule II rates are not the minimum rates and the company can adopt different useful lives based on technical advise

• Assets less than Rs 5000 need not be depreciated completely

• No rates for double and triple shift but extra depreciation of 50% and 100%

• Componentisation - If a part of an asset has a separate useful life independent of the parent, then a separate rate has to be applied for that part if that part is material in relation to the asset

• Assets which do not have a useful life as at the commencement of the Act are required to be written off completely. Such amounts may be debited to P& L or adjusted to General Reserves

2. Do we have to align depreciation with the new Companies Act 2013 rates for the year ended March 31, 2015
Of the above, the change in rates has to be effected for the year ended March31, 2015 whereas the component level depreciation has been deferred as per a notification and is not applicable for the period ended March 31, 2015
3. My client has a financial year ending December.  Should we revise the depreciation as per the new Act or does the old Act apply for “year ended Dec 31 2014”
The revised useful life system applies for accounting periods commencing on or after April 1, 2014 and hence the client may prepare the accounts as per the earlier Act in reference to depreciation as there is a specific mention of the term accounting period
4. Schedule II speaks of technical opinion.  Should this be an independent opinion
The Schedule II does “not” speak of an independent opinion.  But from an auditors perspective, one may not be wrong in asking for one especially if the value of the depreciation and change to the same is material
5. What are the provisions relating to assets working on double shift or triple shift basis?
• Useful life given in Part C assumes single shift working
• Double shift -  increase depreciation by 50%
• Triple shift – increase depreciation by 100%
• Take note of number days for which the company has worked double shift and triple shift and the rates have to be increased proportionately
6. How do we calculate the WDV rates based on the useful life of the asset

The WDV rates are calculated by applying the formula as specified below Cell reference
Useful life –n Years 5 C4
Residual value – s Rs. 5 C5
Cost of the asset – c – Rs. 100 C6
Rate % 1-POWER((Residual value/Cost),(1/No of years)) C7

7. How do we calculate the WDV rates if residual value is Rs zero

Assume Rs 1 as the residual value

8. Is this depreciation revision a change in estimate or accounting policy

This change is a change in accounting estimate only

9. There is an amount of Rs 1.2 crores which is the value of assets whose useful life has expired ( as per CA 2013 useful life ) and needs to charged off.  Can we take a part to the P & L and a part to the Reserves and Surplus

From the date Schedule II comes into effect i.e. 1 April 2014, the carrying amount of the asset as on that date

(a) Shall be depreciated over the remaining useful life of the asset

(b) After retaining the residual value, may be recognised in the opening balance of retained earnings or may be charged off to Profit and Loss account where the remaining useful life of an asset is nil. Hence the company will have to reassess the useful life of its existing fixed assets in accordance with Schedule II.

It would be advisable to follow one treatment only

10. In addition to the changes prescribed by CA 2013, my client would like to change the method of depreciation from SLM to WDV.  How should I go about doing it?

• First Calculate retrospective workings and transfer to P & L or reserves
• Calculate the depreciation for the year as if there was no change in the method
• Calculate the depreciation under the revised method on a retrospective basis from the date of capitalization of the asset
• The difference between points 2 and 3 above reflects the difference to be disclosed

Click on the link for a WDV depreciation calculator under the new Companies Act 2013. http://www.thesmartca.com/mip.php?type=wdv150510

MEMBERSHIP OF THE COMPANY

A Company is composed of members,though it has its own entity distinct from members.The Members of a company are the persons who,for the time being,constitute the company, as a corporate entity.


According to section 41 of the Companies Act,1956 defines who are the members as follows:

(1) The Subscribers of the memorandum of a company shall be deemed to have agreed to become members of the Company, and on registration, shall be entered as members in its register of members;
(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall, be a member of the company;
(3) Every person holding equity share capital of a company and whose name is entered as beneficial owner in the records of a depository shall be deemed to be a member of the concerned company

In Case of a company limited by shares, the shareholders are the members.Generally speaking, every shareholder is a member and every member is a shareholder.But there is an exception to this statement,a person may be a holder of shares by transfer but would not become its member until the transfer is registered in the books of the company in his favour and his name is entered in the register of members.

Who can become a Member?

In Addition to an Individual, the following may also become a Member of the company

(i) A Company -it must have powers in MOA & AOA to make investments in other Body Corporates

(ii) A registered Co-operative Society

(iii) A Non-resident Indian- No shares can be  issued or transferred to him without the General or Special Approval of Reserve Bank of India and he cannot be admitted as Member of the Indian company without the General or Special Permission of the Reserve Bank of India.

(iv) Minor-Minor is incapable to enter into the contract for being a Member but the Guardian of the Minor could apply for the issue of shares on behalf of the Minor  and the company can allot shares to the guardian.When the minor attains the age of majority,he becomes entitled for the dividend and other benefits of the shareholder.

(v) HUF : Hindu Undivided Family is represented by its Karta.In case of HUF,the shares can be allotted to the name of the Karta in HUF.

(vi) Registered Trade Unions

(vii) Joint Shareholders


Who cannot become a Member?
1.Partnership Firm

2.Legal Representative

3.Pawnee

4.Public Office

5.Membership by a Subsidiary Company to its Holding Company


CESSATION OF MEMBERSHIP:

A person may cease to be a member on the following grounds:

(i) on surrender of shares

(ii) on transfer of shares

(iii) on Buyback of shares

(iv) on death of member

(v) By rescission  of contract of Membership on grounds of misrepresentation or mistake.

(vi) on forfeiture of shares

(vii) on bankrupcty of member/