@Krishna19 thanks for writing in.
I apologise, I might not be able to answer you perfectly as my accounting and forensic accounting is not that strong.
However, on my best effort basis i will try to respond to your queries.
- Asset life: generally company provides this information in annual report. My experience is fixed plant & machinery are in 7 to 10 year life and computers and other equipments are ~3 years.
- If a company writes-off assets agressively its good or can be a red flag. If company is genuine (no red flag) even then there is generally no incentive due to tax deductions limitations. If company is not genuine then agressive write-offs/disposals might be sign of mischief. You can look at Rolta India’s balance sheet from Fy2011 to FY2016. They wrote off almost all they bought. just a snapshot below from 2016 annual report.
they had outstanding gross block of computers at 2572 crore, sold 2843 crores. final result net block of 28 crores in 2016 vs. 1624 crores. Selling is still ok but were they sold at profits? no – 2016 profits were down. similar trend can be seen in other equipments.
So thats why we should be aware of agressive write-offs/disposals as well as depreciations.
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