Page 253 - DMGT104_FINANCIAL_ACCOUNTING

Unit 10: Accounting and Depreciation for Fixed Assets

26. Where the depreciable assets are revalued, the provision for depreciation should be based Notes
on the revalued amount and on the estimate of the remaining useful lives of such assets.
In case the revaluation has a material effect on the amount of depreciation, the same
should be disclosed separately in the year in which revaluation is carried out.
27. If any depreciable asset is disposed of, discarded, demolished or destroyed, the net surplus
or deficiency, if material, should be disclosed separately.
28. The following information should be disclosed in the financial statements:
(i) The historical cost or other amount substituted for historical cost of each class of
depreciable assets;
(ii) Total depreciation for the period for each class of assets; and
(iii) The related accumulated depreciation.

29. The following information should also be disclosed in the financial statements along with
the disclosure of other accounting policies:
(i) Depreciation methods used; and

(ii) Depreciation rates or the useful lives of the assets, if they are different from the
principal rates specified in the statute governing the enterprise

Self Assessment

Fill in the blanks:
21. A change in the …………………… of depreciation is treated as a change in an accounting
policy and is disclosed accordingly.
22. …………………… has a significant effect in determining and presenting the financial
position and results of operations of an enterprise.

10.6 Summary

 Fixed assets are those assets which are held with the intention of being used for the
purpose of producing goods or providing services and are not held for the sale in the
normal course of business.

 There are two basis for the valuation of fixed tangible assets – (a) historical cost
(b) revaluation.
 The cost of fixed cost comprises of its purchase price and direct costs and import duties and
directly attributable costs.
 At the time of revaluation of assets, the entire class of assets is revalued. The basis of
revaluation should be disclosed.

 When the assets are purchased on the basis of Hire Purchase System, such assets are shown
in the balance sheet at their cash value.
 There is special treatment of intangible assets as goodwill, patents, know-how, etc.

 Depreciation is the decrease in the value of assets at the given date due to wear and tear,
obsolescence, efflux of time, accident and exhaustion.

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