ACCA P4 Tramont Co

This topic has 3 replies, 3 voices, and was last updated 8 years ago by John Moffat.

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November 19, 2016 at 10:30 pm #350080
vasvi
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In foreign subsidy, if there are inter-company sales involved from parent to subsidy, profit of the parent co. is added before tax applicable at home rate.
This question mentioned contribution but not profit, is that the reason its not been added back before applying tax at home?
November 20, 2016 at 7:55 am #350116
John Moffat
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But is had been added back – see workings 7. The figures brought in for the contribution are after accounting for the tax on it.
(I am puzzled why you should think that it being contribution and not profit should make any difference – contribution is profit before fixed overheads, and since the fixed overheads aren’t changing, the extra contribution is the extra profit!!)
September 4, 2017 at 11:18 am #405299
parisnaaa
Member
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Hi John. When calculating the tax shield why PV is calculated instead of annuity?
September 4, 2017 at 12:14 pm #405316
John Moffat
Keymaster
- Topics: 57
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We always calculate the PV !!
You can only use annuity factors to calculate the PV when it is an equal cash flow each year. However here, after converting to $’s, the cash flow is not equal each year and therefore you have to calculate the PV for each year separately.
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