Investment Valuation in India

Method of Depreciation - Straight Line or Written Down Value (WDV) / Double Declining Balance Method The new Companies Act 2013 prescribes the Useful life of assets (Schedule II) as opposed the rate of depreciation in the Companies Act 1956. The plain reading of the act implies that the Ministry of Corporate Affairs (MCA) expects the companies to follow the Straight Line Method of Depreciation as opposed to the Written Down Value of Depreciation. Although it is not prescribed which method of depreciation is required to be used. If this implication is drawn, this may impact the financial statements significantly as this would result in change of depreciation method for all companies. Moreover, the change in depreciation method would imply retrospective application which can change the financial statements significantly. There is a breather though. Companies can still opt to continue the Written Down Value Method of Depreciation under the New Companies A...

Setting off of unabsorbed losses and unabsorbed depreciation during Amalgamation The setting off of unabsorbed losses and unabsorbed depreciation of the amalgamating company by the amalgamated company is allowed only in limited cases as envisaged in Sec 72(A) of Income Tax Act in order to encourage revival of sick units. The setting off, however, is allowed only if the following conditions are fulfilled: a) the amalgamated company was not a financially viable company immediately before amalgamation b) the amalgamation was in the public interest c) such other conditions as the central government may specify by notification in the official gazette to ensure that benefits under this section is available only to facilitate rehabilitation or revival of the business of the amalgamating company Carry forward of unabsorbed depreciation is allowed only if: a) during the previous year relevant to the assessment year, the business of the amalgamating company was carrie...