Page 91 - IC26 LIFE INSURANCE FINANCE

There are two method of depreciation:

1] Straight Line Method (SLM)

2] Written Down Value Method (WDVM)

Note: A combination of more than one method may be used.

The depreciation method selected should be applied consistently from period to period. The change in

method of depreciation should be made only if;

The adoption of the new method is required by statute; OR For compliance with an accounting standard; OR

If it is considered that change would result in a more appropriate preparation of financial statement; or

 When there is change in method of depreciation, depreciation should be recalculated in accordance

with the new method from the date of the assets coming into use. (i.e. RETROSPECTIVELY)

 The deficiency or surplus arising from such recomputation should be adjusted in the year of change

through profit and loss account.

 Such change should be treated as a change in accounting policy and its effect should be quantified

and disclosed. The useful lives of major depreciable assets may be reviewed periodically.

 Where there is a revision of the estimated useful life, the unamortised depreciable amount should

be charged over the revised remaining useful life. (i.e. PROSPECTIVELY)

 Any addition or extension which becomes an integral part of the existing asset should be

depreciated over the remaining useful life of that asset.

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