COVID-19 Impact on Depreciation

What is depreciation?

Depreciation is an accounting practice used to spread the

cost of a tangible asset over its useful life. Depreciation
represents how much of the asset's value has been used up
in any given time period.
• A depreciation expense has a direct effect on the profit
that appears on a company's income statement. The
larger the depreciation expense in a given year, the
lower the company's reported net income – its profit.
However, because depreciation is a non-cash expense,
the expense doesn't change the company's cash flow
Types of depreciation

There are several different depreciation methods:

• Straight-line
• Declining balance method
• Double declining balance method
• Sum of the years digits
• Units of Production
PAKISTAN STATE OIL COMPANY LIMITED [PSO]

• PSO is a petroleum company which has the largest share in the

liquid fuel market.
• Pakistan’s Fiscal year is (1 July through 30 June)
• Comparison will be between 2017 and 2020
Depreciation is charged to profit or loss on an
annual basis using straight-line method so as to
write off the historical cost of the assets over their
estimated useful lives.
Depreciation on additions is charged from the
month in which the asset is available for use and
on disposals up to the preceding month of disposal.
 Accumulated depreciation of all assets: -
2017 2021
Assets (In Rs.’000) (In Rs.’000) Dep rate %
Buildings 583,757 674,832 5%-10%

Tanks and Pipelines 3,401,049 3,905,498 5%-20%

Services and Filling stations 8,125,973 9,539,979 5% -33%
Plant and machinery 3,043,963 3,931,154 5%-33%
Furniture and fittings 254,696 327,086 7%-33%
Vehicle & other rolling stocks 1,126,035 153,0871 17%-20%
Office equipment 670,057 926,865 7%-33%
Railway sliding 53,136 69,894 7%-10%
Gas cylinders 125,245 221,700 10%
Total Depreciation for the year 18,181,791 22,160,799
Comparison

The total depreciation for the year 2017 was Rs. 18,181,791,000.
after the year of 2019 which was when COVID had struck
while the total depreciation for the year 2021 was Rs. Rs.
22,160,799,000. after the effects of COVID-19.
THANK YOU