Component Accounting Under Ind AS 16: Splitting and Depreciating Complex Industrial Assets

Why Monolithic Asset Recording Is No Longer Compliant

Under Ind AS 16 (Property, Plant and Equipment) and Schedule II of the Companies Act 2013, each part of an item of Property, Plant and Equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

A Real-World Example: Commercial Aircraft & Heavy Furnaces

Consider an industrial furnace costing ₹5 Crores: the structural shell might last 25 years, while the internal refractory refractory lining requires complete replacement every 3 years. Depreciating the entire ₹5 Crores over 25 years drastically understates early depreciation and causes massive unamortized write-offs upon lining replacement.

Relaso Fixed Asset Suite natively supports parent-child component hierarchies, allowing finance teams to define distinct useful lives, salvage values, and replacement cycles for sub-components.