# Backlog Depreciation

## Definition of Backlog Depreciation

Whenever an asset is revalued, the profit on revaluation is transferred to Revaluation Reserve Account. But, the revaluation also gives rise to a backlog depreciation. This backlog depreciation should be charged to Revaluation Reserve Account. The concept of backlog depreciation can be followed by the help of the below illustration.

## Formula to calculate Backlog depreciation

Backlog Depreciation = Difference in depreciation – Depreciation changeable in current year

### Example

Compute the backlog depreciation from the information given below:

A machine was purchased on 1.1.2013 at a cost of \$12,00,000 and its useful life was estimated to be 10 years. Its replacement cost was \$20,00,000 on 1.1.2018 and \$22,00,000 on 31,.12,2018. Calculate the amount of backlog depreciation.

#### Solution

Replacement cost of the machine on 1.1.2018 (Current value) = \$20,00,000

Expired life on 1.1.2018 = 5 years

Depreciation under CCA = (20,00,000 x 5) / 10 = \$1,00,000

Replacement/Current value on 31.12.2018 = \$22,00,000

Expired life on 31.12.2018 = 6 years

Depreciation under CCA = (22,00,000 x 6) / 10 = \$13,20,000

Difference in Depreciation = 13,20,000 – 10,00,000 = \$3,20,000

Current year’s depreciation =  (20,00,000 + 22,00,000) / (2×10) = \$2,10,000

Backlog depreciation = Difference in depreciation – depreciation changeable in current year

= 3,20,000 – 2,10,000

= \$1,10,000

### 1 thought on “Backlog Depreciation”

1. Get your commas in the right places.
Your numbers make no sense

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