98 AS 6 (revised 1994)
Accounting Standard (AS) 6
AS 6 (issued 1982)
Accounting Standard (AS) 6*
[This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the Preface to the Statements of Accounting Standards 1 and the ‘Applicability of Accounting Standards to Various Entities’ (See Appendix 1 to this Compendium).]
1. This Standard deals with depreciation accounting and applies to all depreciable assets, except the following items to which special considerations apply:—
(i) forests, plantations and similar regenerative natural resources; (ii) wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar nonregenerative resources; (iii) expenditure on research and development;
(iv) goodwill and other intangible assets;
(v) live stock.
This standard also does not apply to land unless it has a limited useful life for the enterprise.
2. Different accounting policies for depreciation are adopted by different enterprises. Disclosure of accounting policies for depreciation followed by * Accounting Standard (AS) 6, Depreciation Accounting, was issued by the Institute in November 1982.
Attention is specifically drawn to paragraph 4.3 of the Preface, according to which Accounting Standards are intended to apply only to items which are material.
100 AS 6 (revised 1994)
an enterprise is necessary to appreciate the view presented in the financial statements of the enterprise.
3. The following terms are used in this Standard with the meanings specified:
3.1 Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effluxion of time or obsolescence through technology and market changes. Depreciation is allocated so as to charge a fair proportion of the depreciable amount in each accounting period during the expected useful life of the asset. Depreciation includes amortisation of assets whose useful life is predetermined.
3.2 Depreciable assets are assets which
are expected to be used during more than one accounting
(ii) have a limited useful life; and
(iii) are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business.
3.3 Useful life is either (i) the period over which a depreciable asset is expected to be used by the enterprise; or (ii) the number of production or similar units expected to be obtained from the use of the asset by the enterprise.
3.4 Depreciable amount of a depreciable asset is its historical cost, or other amount substituted for historical cost2 in the financial statements, less the estimated residual value.
This Standard does not deal with the treatment of the revaluation difference which may arise when historical costs are substituted by revaluations.
4. Depreciation has a significant effect in determining and presenting the financial position and results of operations of an enterprise. Depreciation is charged in each accounting period by reference to the extent of the depreciable amount, irrespective of an increase in the market value of the assets. 5. Assessment of depreciation and the amount to be charged in respect thereof in an accounting period are usually based on the following three factors:
historical cost or other amount substituted for the historical cost of the depreciable...
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