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Past exam – Mar/Jun 2019 Q1 (Talam Co)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Past exam – Mar/Jun 2019 Q1 (Talam Co)

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 19, 2021 at 8:14 am #614725
    hsbae
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Hello sir,
    Have a question on tax allowable depreciation for the project appraisal.

    Could you kindly explain why the answers provided did not add T.A.D back to the cashflow after tax calculation?
    I have tried other questions and there mix of cases where they have added back or did not and I am so confused.

    Much appreciated

    March 19, 2021 at 9:08 am #614738
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    Tax is always calculated on the operating cash flow less the TAD.

    You can either calculate the tax in the actual statement of the cash flows, in which case we subtract the TAD, then calculate the tax, and then add back the TAD because it is not a cash flow (and this is the approach we always take in Paper FM (was F9)).

    Alternatively you can calculate the tax as separate workings (as is the case in Talam). In that case, since the TAD has not been subtracted in the statement of the cash flows, there is nothing to add back.

    I assume. that you attempted the question before checking with the answer and you will therefore have found that the net cash flows each year are exactly the same for both approaches.

    March 20, 2021 at 7:35 am #614818
    hsbae
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Ah how silly of me. totally understand what you mean. Thanks sir!

    March 20, 2021 at 9:24 am #614831
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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