When such a change in the method of depreciation is made, depreciation is recalculated in accordance with the new method from the date of the asset coming into use. The deficiency or surplus arising from retrospective re-computation of depreciation in accordance with the new method is adjusted in the accounts in the year in which the method of depreciation is changed and it is charged or credited to Profit & Loss Account as per the case.
Such a change is treated as a change in accounting policy and its effect is quantified and disclosed.
- The depreciation methods used,
- The total depreciation for the period for each class of assets,
- The gross amount of each class of depreciable assets and the related accumulated depreciation are disclosed in the financial statements along with the disclosure of other accounting policies.
- The depreciation rates or the useful lives of the assets are disclosed only if they are different from the principal rates specified in the statute governing the enterprise.
- In case the depreciable assets are revalued, the provision for depreciation is based on the revalued amount on the estimate of the remaining useful life of such assets. In case the revaluation has a material effect on the amount of depreciation, the same is disclosed separately in the year in which revaluation is carried out.
A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly.