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Full Version: Who decides about Depreciation rates?
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In Pakistan, which body decides the depreciation rates of fixed assets? or its just a generally accepted practice. Why dep rates are different in accounting and tax treatment in some cases.?
CBR
Mr. Mahtab CBR decides depreciation rates for tax purposes....
No one can direct the depreciation rates in a country for accounting purposes...
IAS says that it is upon the management intention. As the depreciation rates should depict the inflow of economic benefit attached with the assets. So, it is only the management of the company that decides the depreciation rates. They can use any rate, if they have the justification of inflow of economic benefit.
And difference arises in tax and accounting depreciation due to above given explanation.i.e. CBR directs a signle rate for a class of asset, but management may have a differing opinion and may charge different rates...
Depreciation rates are based on estimated useful lives of the assets. Asset having 10 year's life will have to be depreciated @10% p.a.
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by smraza</i>
<br />Depreciation rates are based on estimated useful lives of the assets. Asset having 10 year's life will have to be depreciated @10% p.a.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

You ignored pettern of benefits....
You assumed straight line. It may be diminishing balance , machine hours etc.
I wud ask u Mr. SM raza that on which thing the useful life of an asset is based???
In my opinion it is based on the future economic benefits embodied with the asset. When economic benefits do not come, the asset is no more useful...
So, the depreciable amount, shud depict this, thus the depreciation rate...