Accounting · Depreciation Accounting
A firm changes its depreciation method from the Straight Line Method (SLM) to the Written Down Value Method (WDV) in the fourth year of an asset's life. How should this change be treated in the financial statements for the year ending March 2025 according to current Indian Accounting Standards (Ind AS 8 / AS 5)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Depreciation must be stopped entirely for the current year to allow the book value to stabilize before applying the new percentage in the subsequent year.
- 2The firm must calculate the difference between the two methods since the date of purchase and credit the excess depreciation back to the profit and loss account.
- 3The change is treated as a change in accounting estimate and is applied prospectively by calculating the depreciation on the book value at the start of the current year.✓
- 4The change must be treated as a change in accounting policy requiring a retrospective restatement of all previous years' financial figures.
Correct answer
The change is treated as a change in accounting estimate and is applied prospectively by calculating the depreciation on the book value at the start of the current year.
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