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 ...view middle of the document...
3. The following terms are used in this Standard with the meanings
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
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
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
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
historical cost or other amount substituted for the historical cost
of the depreciable asset when the asset has been revalued;
(ii) expected useful life of the depreciable asset; and
(iii) estimated residual value of the depreciable asset.
6. Historical cost of a depreciable asset represents its money outlay or its
equivalent in connection with its acquisition, installation and commissioning
as well as for additions to or improvement thereof. The historical cost of a
depreciable asset may undergo subsequent changes arising as a result of
increase or decrease in long term liability on account of exchange
fluctuations, price adjustments, changes in duties or similar factors.
7. The useful life of a depreciable asset is shorter than its physical life and
pre-determined by legal or contractual limits, such as the expiry
dates of related leases;
(ii) directly governed by extraction or consumption;
(iii) dependent on the extent of use and physical...