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Hi I’m a little confused about the tax allowable depreciation calculation in these two questions.
In dec 2013 q1 we added back the depreciation to arrive at the cash flow but in burung question we did not. Can you please clarify? Thank you
In Buring, the capital allowances have only been subtracted in the tax workings.
In the cash flows themselves, capital allowances have not been subtracted and therefore do not need to be added back.
Usually yes. The one time where you won’t is where there are losses which are carried forward against future profits. This has only happened once in the exam, but when it does happen then you have to calculate the tax on the profits after allowances separately.
Hi John,
Regarding issue cost, if it is 2% gross of finance required it means we have to calculate by x 100/98 to get the gross amount.
For calculating the tax shield and subsidy benefit, why don’t we calculate as per the gross amount?
Thank you
The wording is often ambiguous as to whether the 2% is of the gross amount or of the net amount.
Don’t worry about it. Just state what you have assumed and you will get the marks 🙂
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