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CA Foundation · Accounting · Depreciation and Amortisation

Which of the following is a disclosure required when the depreciation method is changed, as per AS 6?

When the depreciation method changes, AS 6 requires disclosure of the change and the quantum of its effect on depreciation, where the effect is material. Disclosure is a requirement of the standard and is independent of the auditor's view or the merits of the new method.

  1. AThe change must be disclosed along with its amount of effect on depreciation charged, if materialCorrect
  2. BDisclosure is needed only if the auditor objects
  3. CNo disclosure is needed if the new method is more accurate
  4. DOnly the new rate needs to be shown, not the financial effect

Explanation

AS 6 requires disclosure of the change in method and the amount by which the change affects the depreciation charge, where the effect is material. Disclosure does not depend on auditor objection or on accuracy of the new method.

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