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Hi,
About the amount equaling to the TAD is needed for maintaining operations information, I understand the effect of this real cash item is to cancel the non-cash flow of tax depreciation that would otherwise have been added back after taxable cash flow and tax amount are worked out. However, can I ask why this real cash expense is listed after the taxable cash flow workings? why isn’t it listed in the section before the taxable cash flow is worked out, such as:
Revenue – operating expense – maintenance cost – royalties – TAD = taxable cash flow
In such working, TAD would have been added back nevertheless, after the Tax amount is worked out.
You have a valid point, but all I can state is that the examiner never does this in his answers 🙂
Thank you. I will follow the examiner’s steps then when I encounter such questions in the exam.
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