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From lecture note chapter 9 exp 3
The WDA cal start from yr0 to yr4 , but this Machine use for 4 yrs , yr0 to yrs 4 is 5 yrs , from other note they are all start cal from yr1 then tax claim from yr2 onwards . pls help to explain , thank you very much !There is no such thing as “Year 0”
They are points in time that are one year apart.
Time 0 is the start of the first year.
Time 1 is the end of the first year and the start of the second year.
Time 2 is the end of the second year and the start of the third year
and so on.You need to watch my free lectures on investment appraisal with tax where all of this is explained.
(Our free lectures are a complete course for Paper F9 and cover everything needed to be able to pass the exam well. You must either pay to attend courses, or must watch our free lectures if you wish to be successful in the ACCA exams 🙂 )
From the answer there is start from yr0 and tax saved is yr1, so you have 5 yrs tax claim . From other note they are all start from yr1 and tax claim is start from yr2, only have 4 yrs tax claim . so there is no tax claim from yr1 .( yr1 is 0) , I still don’t understand why can claim for 5 yrs ?
But have you watched the lecture??
I work through the example in the lecture and explain the reason (and you cannot expect me to type out the whole lecture here.It is because the machine would be bought on the last day of the current financial year, so they get capital allowances in the year in which it was bought and the 4 years while it is being used – so 5 years in total. The first allowance would be calculated immediately (time 0) and so the tax benefit will be one year later – time 1.
Usually, we assume machines are purchased on the first day of an accounting period and if this were the case there would be 4 capital allowances. The first calculation would be at the end of the first year (time 1) and so the tax benefit will be one year later – time 2.
Year 1 is not ever 0. Read again what I wrote in my previous answer.
And again – you must watch the lectures otherwise there is no point at all in using the lecture notes. If you can’t watch the lectures then you need to buy a Study Text from one of the ACCA approved publishers and study from that.
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