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What is the difference between depreciation calculated for Accounts, depreciation for Insurance?

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Question added by mukkur srinivasan varadhan , Chartered Accountant , Chartered Accountant in practice
Date Posted: 2014/01/20
mukkur srinivasan varadhan
by mukkur srinivasan varadhan , Chartered Accountant , Chartered Accountant in practice

Depreciation as per Accounting is as per the Accounting policy of the company in conformity with the applicable Accounting Standards.

Depreciation as per Insurance is based on the intrinsic value of the assets.

Mamoun elbaghir abdalla mhamad Eltayeb
by Mamoun elbaghir abdalla mhamad Eltayeb , Insurance agent / Producer , Albaraka Insurance Company

Depreciation calculated for accounts is caculated according to accounts methods such as straight line method to determine the diminishing value of the machinery , after usage for several years . While depreciation for insurance which we refer to as consumption is calculated from the total sum insured only when loss occured in an agreed percentage specified intially in the insurance policy, of course to follow the principle of indemnity and indemnfiy the insured with the actual value of the interest insured at  the time when loss was occured. However this reduction in the claim value may only be applied to the motor vehicles and machinery insurance.

 Thanking you.

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