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Since enactment of companies act 1956 in the light of british companies act, all tangible assets were aggregated as fixed assets with due emphasis on their historical cost, infinite useful life and under a going concern entity assumption. Accordingly depreciation was charged on the historical cost of the fixed assets irrespective of their residual worth of useful life, the profit or loss is calculated on historical cost basis. As a result the figures that are reported in the financial statements are not useful for any decision making purposes. The historical cost itself is questionable because of its relevance at certain subsequent periodic interval. In contrast the international practice for reporting purposes in developed countries didn't put equal emphasis on out historical cost method. The concerned accounting standards IAS-16 property plant &equipment has made further disaggregation of assets as tangible fixed assets, intangible fixed assets, the money figure that is to be assigned to the asset the depreciation to be charged and accordingly computation of profit and loss and reporting of same in the financial statements. This paper focuses on the several issued in the light of IFRS which is similar to IAS - 16 and the mandate of the same incorporated in the companies act 2013.

The present article has been prepared with the following objectives - 1. To examine the present mandate of componentization of assets as per the companies Act 2013. 2. To analyze the mandate of IAS - 16 property, Plant & equipment (PPE) and introduction of concept of fair values accounting for PPE and other tangible assets. 3. To make a case study with regard to adoption of reporting of components of assets as followed by tourism corporation of India and Tata Steel Limited.

The companies Act 2013 has introduced a new concept for measurement of depreciation and useful life of the assets which is similar to the concept of componentization of assets under IFRS (lAS - 16). Particularly in case of asset intensive industries componentization may have a significant impact on the financial statements. (Fixed, assets componentization, American appraisal A Division of Duff & Phelps date last accessed 14-06-2015.)

Objectives of Component Accounting

1. To facilitate accounting for the replacement of components of assets.

2. To make depreciation accounting more reflective in reality.

3. To make sure 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.

4. Generally a three step approach comprising technical analysis, identification of assets to be componentized and identification of components is adopted during the process of componentization of assets.

Reporting Practice in case of Tourism Corporation of India

In respect of Tourism Corporation of India the financial statement has been prepared as per the schedule II of the companies act 2013: In the assets column the following classification has been indicated -

1. Non Current assets are subdivided as fixed tangible assets, Intangible assets, capital work in progress and intangible assets under development.

2. Tangible fixed assets are stated at cost less depreciation, amortization and impairment losses if any. Cost includes the acquisition cost of the cost or construction including duties &taxes (other than refundable), expenses directly related to the location of assets and making them operational for their intended use and in the case of qualifying assets the attributable borrowing cost. Trade discounts rebates and benefits arising from utilization of duty free scripts are deducted in determining the cost of purchase. Projects under which the tangible fixed assets are not yet ready for their intended use are carried as capital work-in-progress at cost determined as aforesaid. This amount is termed as carrying amount as per IAS 16, property, plant &equipment (PPE) (lAS 16 www.iasbdateiastaccessedl 0-06-20 15 )

3. Carrying amount is the amount at which an asset is recognized after deducting any accumulated depreciation and accumulated impairment losses.

4. Intangible fixed assets: Under intangible fixed assets (IF A) include cost of acquired software and designs and cost incurred for development of the company's website &certain contract acquisition cost. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use. Internally developed intangibles are capitalized if all the following criteria can be demonstrated:

a. The technical feasibility and company's intention and ability of completing the project;

b. The probability that the project will generate future economic benefits;

c. The availability of adequate technical, financial and other resources to complete the project and

d. The ability to measure the development expenditure reliably. However expenditure on projects which are not yet ready for intended use one carried as intangible assets under development.

Reporting Practice in case of Tata Steel Limited 

The Tata Steel Limited classified tangible assets under the following categories and with components either added of subtracted during the year as the case may be. Tangible assets have been classified as:

1. Freehold land and roads;

2. Leasehold land, leasehold buildings, plant & machinery, furniture & fixture, office equipmerits, vehicles, rail way siding and them grand total. Similarly intangible assets has been shown in the following order-

As at 1^st April 2013 Additions during the year

Gross block as at 31^stMarch 2014 Accumulated amortization as at 1^st April 2013 Amortization during the year

Accumulated amortization as at 31^stMarch 2014 Net block as at 31^stMarch 2014

However, the intangible assets stated above do not include any internally generated assets.

Component of Asset and Its accounting procedure as per IAS - 16, Property, Plant and Equipment (PPE) :

1. Cost is the amount of cash or cash equivalent paid of the fair values of the other consideration given to acquire an assets at the time of its acquisition or construction or the amount attributed to that asset in accordance with IFRS.

2. The critical exercise in this regard is the determination of fair value in respect of the component of an asset. However fair value is the amount for which an asset could be exchanged between knowledgeable willing parties in an armslength transaction. Armslength transaction means the exchange and the price decided upon after negotiation between the buyers and the sellers.

3. Cost of an item of PPE shall be recognized:

a. When provable future economic benefits will flow to the entity and

b. The cost can be measured reliably

Subsequent Cost

1. Cost of day to day servicing primarily the cost of labour and consumables and may include the cost of small parts. The purpose of these expenditure is often described as for the repairs and maintenance of PPE.

2. Estimating fair value: If an entity is able to determine reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure the cost of the assets received unless the fair value of the asset received is more clearly evident. (IFRS, Taxmann Publication, New Delhi 2011, PP-532-537)

3. PPE include land, Land & building, Machinery, Ships, Aircraft, Motor vehicles, Furniture &Fixture, office equipment.

4. Attributing a fresh money value to the useful life of an asset or PPE in case the estimated. useful life incorporated in Schedule II to the companies Act 2013 is over. Expert valuer be consulted to ascertain the money figure of the asset attributable to it considering its residual cost, which is regarded as revaluation. The revalued figure will be the fair value of that asset for that year : (Schedule II of the companies Act 2013, Taxmann publications 2014, New Delhi) 

Considering the objectives stated above the required data have been collected from secondary sources. Secondary data have been collected from concerned Annual reports of selected corporate entities, accounting standards and published data in journals and newspapers. Analysis: We conducted a research enquiry over the annual reports of Tourism Corporation of India and Tata Tata Steel Limited in order to ascertain the financial reporting practice in regard to componentization of assets as per schedule II of the companies Act 2013.

From the aforesaid discussion we realize that useful life specified in part C of Schedule II of the Companies Act 2013 is for whole of the asset. However, some additional financial exercise has to be undertaken by the management for reporting purposes in order to make the financial information useful for managerial decision. It has further been stated that : a) When the cost of a part of the asset is significant to total cost of the asset; and b) Useful life of that part is different from the useful life of the remaining asset; in that case useful life of that significant part shall be determined separately. This separation of useful life of different components of asset would be relevant for arriving at the residual part or component of an asset. The depreciation of that component shall be calculated separately depending on the usage of the asset. The money figure of the residual component that is reported in the financial statement after necessary revaluation, when it is necessary, that figure will be recognized as fair value of the assets. However, one critical accounting treatment remains unresolved. In case of a shipping company the cockpit of the engine where the captain of the ship seats and drive the craft the component of engine part is found to be comparatively better than the lower part of the vessel which always remains under the water level. The lower component of the ship is obviously always susceptible to greater wear and tear warranting frequent inspection, repairmen &replacement. The second component requires more of supervisory attention involving its cost. Hence componentization of asset and separate depreciation provision for it is prudent and financially logical. In case the second part of the component of the ship beneath the water level is to be revalued on the basis of its estimated residual useful life, whether the loss arising on revaluation of the component be charged against profit in the profit and loss statements for the same year or else it may be spread over a number of reasonable years. Perhaps the management of the company may be required to seek guidance from the ICAI or from the National Financial & Reporting Authority (NFRA) created under section 132 of the companies Act 2013. The consultation with the regulating authority is not only essential but a sufficient condition for reporting of financial information in the financial statements is certified and attested by the competing auditor and then make it available for submission before the public domain when it becomes useful information for various interested groups. The componentization of assets which was behind the fair value concept mandated by the IFRS would make the Financial statements more user friendly and an effective instrument for economic decision making purposes. The practice has been in vogue for many prominent Multinational Corporation's undertaking large scale use of assets to make the business operation going for generating income. The critical component of assets are found in our research inquiry in respect of operating aircraft by airlines entities such as Etihad, Jet Airways, Air India, American Eagle, British Airways, Similarly the practice is common in vessels moving in sea marine water of Famous Pacific Shipping (FPS) New Zealand, Bernhard Schuttle ship manangement Pvt. Ltd. (USA), Meditarian shipping company of Iraq, Shipping Australia Ltd. China Navigation Company Ltd., Pacific Asia Ltd., Australia, Gulf Agency Ltd. UAB. All these companies are facing the risk of their major operating components which are subjected to risk and faster deterioration of its selected engine part vassel component of the asset. All such companies are mandated by their respective legislation and their accounting regulation for reporting requirement to furnish information relating to depreciation on componentwise, loss of value of assets on account of wear and tear, componentwise revalued figure of the component of the residual asset expected to render service in future years. Hence component wise generating information of the component asset of Property Plant and Equipment, component of depreciation on component basis instead of aggregate asset as a whole, will not only essential for better disclosure of financial information but also useful for decision making purposes. It is equally a sufficient condition to make the financial statements useful for making investment decisions by the investors in corporate securities. Such component wise reporting of the asset life would also facilitated adoption of forensic accounting to check the propensity of artificially under charging the depreciation of a severely damaging component of an asset. It would prevent on the other smoothing of income, smoothing of consumption, smoothing of expense and smoothing of taxation by some listed companies keeping in mind the art of luring portfolio investors, qualified institutional bidders (QIB) in the listed securities of the concerned companies.

1. Annual Reports of Tourism Corporation of India and Tata Steel Company. 2. IFRS, Taxmann Publications, New Delhi, 2011, PP-532-537. 3. The chartered accountant, volume 63, No. 11, The Institute of Chartered Accountants of India, New Delhi. 4. Business world Indian Addition, Vol.-54, No.-10, B.W. Business World. 5. Indian Accounting Standard -16, Issued by the Institute of Chartered Accountant of India, New Delhi. 6. Business Standard Several issues. 7. Amended version of Indian Companys act 2013. 8. Taylor Henry, The Statesmen, 2018 addition, Palala Press.