Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Accounting Rate of Return
- This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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- March 23, 2020 at 12:32 pm #565572
I am solving a question on ARR. The question is on a 5 year investment project, in one of the years, after deducting depreciation from the cash flow, the result is a negative figure, implying a loss. How do I treat it?
And you know ARR is Average Accounting Profit divided by Average Investment.
What happens in a case where there is loss instead of profit?March 24, 2020 at 7:28 am #565607What are you asking this in the Paper FA forum? It is not in the syllabus for Paper FA!!
You add up all the profit, subtract any losses, and then divide by 5 to get the average.
March 26, 2020 at 7:36 am #565899I am sorry for asking here. In the question, a 30% tax is included and I don’t think it is normal to tax a loss.
After deducting depreciation, it will result into profit before tax, and the figure brings a loss (negative amount). Should I still tax the loss?March 26, 2020 at 7:46 am #565900If there is a loss before tax then there is a tax saving at 30%. So take the profits less tax and take the loss less tax.
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