PART ‘A’

1. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.
2. For the purpose of this Schedule, the term depreciation includes amortisation.
3. Without prejudice to the foregoing provisions of paragraph 1,—

1 & 2[(i) The useful life of an asset shall not ondinarily 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 difference and provide justification in this behalf duly supported by technical advice";]
 

3["(ii) For intangible assests, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a compmany is not required to comply with the Indian Accounting Standrads (Ind AS), it shall comply with relevant Accounting Standrads under Companies (Accounting Standards) Rules, 2006."], except in case of intangible assets (Toll Roads) created under ‘Build, Operate and Transfer’, ‘Build, Own, Operate and Transfer’ or any other form of public private partnership route in case of road projects.

Amortisation in such cases may be done as follows:-

(a) Mode of amortisation

Amortisation Amount =

(b) Meaning of particulars are as follows :-

The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over the concession period.

Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period.

(c) Example:-

Assuming that the Total revenue to be generated out of Intangible Assets over the period would be Rs. 600 Crores, in the following manner:-

‘*’ will be actual at the end of financial year.

Based on this the charge for first year would be Rs. 4.16 Crore (approximately) (i.e. Rs. 5/Rs. 600 x Rs. 500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/ Rs. 500 Crore x 100) is the amortisation rate for the first year.

Where a company arrives at the amortisation amount in respect of the said Intangible Assets in accordance with any method as per the applicable Accounting Standards, it shall disclose the same.]

Amendments

1.Substituted by Notification Dated 31st March, 2014    - Original Content      (Superseded & Substituted - Refer Notification Dated- 29 August,2014)
 

2. .Substituted by Notification Dated 29,August, 2014.

In part 'A', in paragraph 3, for sub-paragraph (1),

"The useful life of an asset shall not be longer then the useful life specified in part 'C' and the residual value of an asset shall not be more than five percent of the original cost of the asset :

Provided that where a company uses a useful life or residual value of the asset which is different from the above limits, justification for the difference shall be disclosed in its financial statement."

the following sub-paragraph shall be substituted namely:-

"The useful life of an asset shall not ondinarily 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 difference and provide justification in this behalf duly supported by technical advice".

 3.  Substituted by Notification Dated 17th, November, 2016.

 In Schedule II, under Part- A in para-3, in sub - paragraph (ii) for brackets, letters and words

"(ii) For intangible assets, the provisions of the accounting standards applicable for the time being in force shall apply"

the following shall be substituted,

["(ii) For intangible assests, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a compmany is not required to comply with the Indian Accounting Standrads (Ind AS), it shall comply with relevant Accounting Standrads under Companies (Accounting Standards) Rules, 2006."],