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Hello,
First of all, thank you for the notes and lectures. I think that there are extremely useful and very well prepared.
I have a question regarding Example 4 from chapter 9 of AFM notes. This exercise is solved in the 3rd video for this lecture:
There is a statement in exercise: “An amount equal to the amount of the tax allowable depreciation is required each year for the maintenance of non-current assets.”.
The tutor is using maintenance values to offset the amount of depreciation which should be added back to the calculated profit after tax (13:12 minute of the video). Why this amount (maintenance) is not part of the taxable profit calculation? It is, after all, a company expense. Shouldn’t it be tax deductible?Thank you for your help!
Regards,
PJThank you for your first comment 🙂
With regard to the maintenance, what you say is quite correct in that in practice the taxable profit would be after charging both the depreciation and the maintenance.
However, what I do in the lecture is (I am afraid) the same as what the examiner always does in his answers i.e. only charge the amount once in arriving at the taxable profit.
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