Amal Ltd | Annual Report 2024-25 Amal Ltd 98 Depreciation methods, estimated useful lives and residual value The charge in respect of periodic depreciation is derived after determining an estimate of expected useful life and the expected residual value of the assets at the end of its useful life. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life. Depreciation is computed on a pro-rata basis on the straight-line method from the month of acquisition | installation till the month the assets are sold or disposed of. Estimated useful lives of the assets are as follows: Asset category Estimated useful life Buildings 5 to 60 years Plant and equipment 3 to 20 years Vehicles 6 to 10 years Office equipment and furniture 3 to 10 years The useful lives have been determined based on technical evaluation done by the Management | experts, which are different from the useful life prescribed in Part C of Schedule II to the Companies Act, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset. The residual values, useful lives and method of depreciation of property, plant and equipment are reviewed annually and adjusted prospectively, if appropriate. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount of the asset is greater than its estimated recoverable amount. Land accounted under finance lease is amortised on a straight-line basis over the primary period of lease. Assets held under finance leases are depreciated over their expected useful lives on the same basis as own assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. g) Capital work-in-progress The cost of PPE under construction at the reporting date is disclosed as ‘Capital work-in-progress.’ The cost comprises purchase price, borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Advances paid for the acquisition | construction of PPE which are outstanding at the Balance Sheet date are classified under the ‘Capital Advances’. h) Intangible assets Computer software includes enterprise resource planning application and other costs relating to such software that provide significant future economic benefits. These costs comprise license fees and cost of system integration services. Development expenditure qualifying as an intangible asset, if any, is capitalised, to be amortised over the economic life of the product | patent.
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