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In year change of depreciation rates

In year change of depreciation rates

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Entity is public sector, but not local / national government. Income c£10m.

Issue regarding a change of depreciation rates.

It's been recognised that some asset classes are over depreciated. Management have conducted a review, and shared with auditors who accept the findings.

However auditors are firm that any new rates should apply from start of next financial year.

Entity would prefer to apply new rates for the current financial year.

Q - can anyone think of any restrictions on amending depreciation rates in year. I can't see any logical reason for auditors insistence on deferral to new financial year.

Any thoughts welcome.

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By johnt27
16th Apr 2013 13:24

No restrictions

There are no restrictions on when an accounting estimate such as depreciation or useful economic life are changed. It sounds like the auditors don't want to do any additional work on this section if they are insisting on deferring the amendments. You may want to question if management feel that an amendment is required, and therefore the accounts aren't correct why the auditors would be willing to sign off unless the impact is immaterial.

The only thing that can't be done is to unwind the overdepreciation that has already ocurred, but instead adjust rates so as to reduce the amount of depreciation charged to P&L going forward.

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By johngroganjga
16th Apr 2013 13:41

If accounts are still open there is no technical reason for not reflecting the new asset lives at the first opportunity.  If auditors' objection is that they have already audited the old figures and are not going to be paid extra for re-doing that section of their file, they may have a point but should be upfront as to what the real reason is.

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