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Hi,
I am doing an APV question on the 2018 specimen paper. When checking my answer I noticed I they didn’t add back Tax allowable depreciation. Would I get it wrong for adding it back or is there a reason why they excluded it?
Thanks,
The reason is that the examiner has shown the tax workings separately and it is calculated on the profits after deducting TAD.
However in the main statement of the cash flows, depreciation has not been subtracted and therefore there is nothing to add back.
If you had done the tax workings in the actual statement of the cash flows, and therefore had subtracted the TAD then you would indeed have been correct to add it back (and you would end up with the same final answer).
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