Schedule II, Part C of the Companies Act, 2013 lists an indicative useful life for each major asset class — for example 15 years for general plant and machinery, 10 years for furniture and fittings, 3 years for end-user computers, 6 years for servers and networks, and 60 years for an RCC-framed building other than a factory. Para 3 of Schedule II explicitly allows a company to use a different useful life, but only if the technical justification for departing from the indicative figure is disclosed in the financial statements. The comparison itself — is the life in use below, above, or matching the indicative figure — is a quick first check; whether a disclosed justification actually exists, and whether it holds up, is the real test.
Why the indicative life gets treated as mandatory when it isn't
Because Schedule II is the default most accounting software ships with, and because matching it avoids the extra disclosure step, a lot of fixed asset registers simply use the indicative figures for every asset without anyone deciding to. That's not wrong, but it also isn't automatically right — Ind AS 16 asks for useful life and residual value to be reviewed at each financial year end based on how an asset is actually used, which some asset classes genuinely require a different figure for.
The disclosure gap this creates
- A useful life shorter than Schedule II (heavier usage, harsher operating conditions, planned early replacement) needs the reason stated, not just the shorter number used.
- A useful life longer than Schedule II needs an actual basis — a maintenance history, a technical assessment — not just a preference for lower depreciation expense.
- Component accounting under Ind AS 16 can mean a single asset legitimately carries several different useful lives for its parts, which a single asset-class comparison can't capture.
Regulatory requirement
Schedule II, para 3 and Ind AS 16's requirement to review useful life and residual value annually both apply regardless of which direction the departure runs — longer or shorter than the indicative figure.
What a quick comparison is useful for
Running every asset class a client uses through the indicative figure takes a few minutes and tells you exactly where to ask the disclosure question — not whether the answer given is adequate. That second part needs the actual justification in hand, tested against how the asset is really used, not a static lookup table.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Fixed assets & capexDepreciation testing: audit procedure and recomputationChecking useful lives against Schedule II, recomputing the charge independently for a sample, and handling mid-year additions, disposals and changes in estimate.
- Fixed assets & capexFixed asset register audit: completeness and accuracy checksWhat a fixed asset register must contain, how to tie it to the general ledger, and the gaps that quietly survive year after year if nobody checks for them.
- Fixed assets & capexImpairment testing for fixed assets: a practical approachThe impairment indicators that actually matter for a mid-market client, when a formal test is genuinely warranted, and how to test management's recoverable amount workings.
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