Depreciation on plant and machinery during the shutdown period

By | September 26, 2015

A company is in the business of manufacturing products . During the current financial year, the company shut down the factory for a period of 2 months. Whether the company should provide for depreciation on plant and machinery during the shutdown period ?

Depreciaiton

As defined in para 3.1 of AS 6Depreciation 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 predetermined”.

Conclusion :Following the rationale of depreciation as explained in the definition above, the company should depreciate plant and machinery during the shutdown period because there is a loss due to effluxion of time.

 

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