Niranjan & Co has been charging depreciation @ 20% per annum on Straight Line Method. It now wants to change the method to diminishing balance method, the rate of depreciation being 35% per annum. Can the company do so?
Or
As per consistency concept, a company cannot change an accounting policy. Does this hold true in all instances? Explain.
Niranjan & Co has been charging depreciation @ 20% per annum on Straight Line Method. It now wants to change the method to diminishing balance method, the rate of depreciation being 35% per annum. Can the company do so?
Or
As per consistency concept, a company cannot change an accounting policy. Does this hold true in all instances? Explain.
Yes, the method and the rate of depreciation can be changed but only in the following circumstances
(i) The change is to comply with statutory regulations, or
(ii) The change would help in better understanding of the true, financial position of the business.
Also, the change and its effect on profit should be disclosed in the financial statements of the enterprise.
Yes, the method and the rate of depreciation can be changed but only in the following circumstances
(i) The change is to comply with statutory regulations, or
(ii) The change would help in better understanding of the true, financial position of the business.
Also, the change and its effect on profit should be disclosed in the financial statements of the enterprise.
