When to start charging depreciation on an asset as per AS 10?

As per AS-10 ( Revised ): Property, Plant and Equipment, depreciation on an asset should begin when the asset is in the location and condition necessary for it to be capable of operating in the manner as intended by the management.

This means a firm should start charging depreciation when the asset is ready to be used as per the management’s desire.

Let’s take an example to understand this clearly:

A business bought a drinking water cooler for its office use on 1^st April 2021. Now, this water cooler needs to be installed and wiped with Isopropyl Alcohol before it can be put to use.

The business completed all the required procedures by 1st May 2021, but it opened the machine for office use from 1^st August 2021.

So the question arises, from when to start charging depreciation?

• 1^st April 2021 – The date of Purchase
• 1^st May 2021- The date when the machine was ready to use.
• 1^st August 2021 –The date from which the machine was put to use.

The answer is 1^st May 2021– The date when the machine was ready to use.

It doesn’t matter whether the company started the use of an asset or not. Once an asset is in

• the location and condition
• necessary for it to be capable of operating
• as intended by the management,

the depreciation should begin.