Fixed Asset Componentization



Ace Consulting Engineers undertake cost segregation analysis, where different parts of a machine or equipment are separated into different lives to take advantage of accelerated depreciation for tax purposes. Componentization requires each part of a fixed asset , with a cost that is significant in relation to the total cost of the item, to be depreciated separately. A detailed report on fixed asset componentization is required from the qualified Chartered Engineer & Registered Valuer by the Tax auditors to justify the requirements of Ind AS-16.


The primary objective of the component accounting as per Ind AS-16 for Plant and Equipment are :-


  • To ensure the depreciation is in line with the actual usage of assets and to maximize the usage of significant components of the asset.
  • To ensure that the financial position is fairly reflected in the balance sheet and that the income statement appropriately reflects the consumption of economic benefits inherent in those assets

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