The impact of depreciation policy upon company's performance – an empirical study

Abstract EN

Depreciation policy is considered as a very important policy.

Enough care ought to be taken while formulating this policy, as it is linked with many administrative and financial decisions-such as determination of actual profits & costs ; replacement of assets ; avoiding distribution dividends out of capital ; presenting true and fair view ; keeping the capital intact ; evaluating the existing assets value-in-use and saving taxes.

The main objective of the present study is to bring out awareness among various accountants, public and private companies, business and government to adopt an effective policy of depreciation.

The present study is a case study of selected company's depending heavily on secondary data.

The data has been collected from various issues of Annual Reports of this company's.

The secondary data in published form has been supplemented by the personal interviews with the chief executives officer, managing directors.

The main findings of the research work can be summarized as follows : 1.

There is no difference between pre-set rates of depreciation and practice of the company ; 2.

There exists no correlation between the amount invested in Assets and the rate of depreciation on it ; 3.

The amount provided for the depreciation was sufficient during the period of study ; 4.

There exist a relationship between the expansion of gross block and sales ; 5.

There is a significant variation in the amount of depreciation charged by the company's during period of study.

Based on these conclusions appropriate recommendations have been formulated for the accountants, financial managers, planners for better performance of the company's.