Depreciation on addition on existing assets

[former_member686872]

Hi,

the requirement is like this,(in ECC5.0)

Facing problem with respect to assignment of depreciation to
addition to existing assets where in the depreciation is to be computed for
such additions for the remaining period of life of the original asset.

. It can be further explained by way of the following examples:     

1. Machinery capitalised let us say on 01.04.2012 for Rs.
   100,000/- shall be depreciated on straight line method, @ 7.81%, I.e.,
   approximately for  a period of 13 years assuming the asset is used in
   double shift, which means, the said asset gets depreciated @ 7,810 per annum
   and at the end of 13^th year entire value of the asset would have
   been depreciated to bring the book value to Re.1/-
2. Let us assume that during 01.07.2012, certain specific
   spares valuing Rs.50,000/- is used to maintain the above original asset, the,
   asset then, should get depreciated @ 7.95% appx, @ Rs.11,714/- p.a. for the
   remaining period of life of the asset.

Kindly help how to resolve.

Thank you in advance

[Muralinag14]

Sub-asset can be created only when if the addition has separate identity and can be used after main asset diposal otherwsie it can be treated as part of the main asset.

As per your example the addition is part of the main asset, so acquisition can be booked to main asset.

[Former Member]

Hi,

The best way is to record these additions as sub-assets to the existing assets. This way you can post depreciation in the desired way because if the additions are posted to the existing asset, then it is not possible to apply two different percentages to calculate depreciation. Even accounting standards suggest that additions should be treated as seperate assets.

While creating sub-assets you will have to manually calculate and enter the useful life (by referring to the main asset), because life of the sub-assets is generally equal to the remaining useful life of the main asset.

Regards,

Ravi Kumar