Tuesday 2 September 2014

The MCA amends norms relating to useful life and residual value; clarifies certain aspects of capitalisation of costs

The Ministry of Corporate Affairs (MCA) vide notification dated 29 August 2014, has made certain amendments to the schedule II which deals with useful lives to compute depreciation under the Companies Act, 2013 (the Act). The amendments shall come into effect from the date of publication in the Official Gazette.
Through general circular dated 27 August 2014, the MCA has issued clarifications regarding capitalisation of costs incurred during extended delay in commercial production (for reasons beyond the developer's control), whether capitalisation of power plants should be unit-wise or project-wise, and applicability of accounting standard on Accounting for fixed assets (AS 10) and Borrowing costs (AS 16) on ‘cost plus project' or 'competitive bid project’.
Our First Notes provides an overview of amendments to the schedule II and the MCA clarification regarding the capitalisation of borrowing costs in the power sector. For the text of the amendments to schedule II issued by the MCA, please click here, and for the text of the MCA clarification,

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