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Sir I have seen examiner writing in bullet points in the report eg the chikepe from M/J 18 has bullet points for the assumptions of the valuation method. We are always advised to avoid bullets. will the examiner deduct any professional marks for it?
Another generic doubt related to the tax working for the NPV calculation, should we show it separately like the examiner does or on the face of NPV presentation. The article read the mind of the marker says the following:
“Two marks are awarded for the correct calculation of the
tax cash flows after adjustment for the losses. These would
far better have been shown in a separate working. The
attempt to incorporate the working in the answer gives
rise to later errors”Lastly sir for tax losses sometimes they carry forward and sometimes they calculate tax credit . what to do when the qs is silent . I have watched your lectures on these topics.
Thankyou so much Sir .
Although I would avoid using bullet points, you would not lose professional marks.
When a question asks for a report then all the workings should be show separately in the appendix.
With regard to tax, there are only ever tax losses to carry forward if the company as a whole makes a loss. We always assume (just as in Paper FM) that the company is currently making a profit and that therefore a loss from a new investment simply reduces the existing company profit and therefore saves tax.
The only time in Paper AFM that there is loss relief is when the investment is in another country and therefore there are no existing profits to set off the loss against. Then it is carried forward and reduced future profits. I do state this in my lectures.
Thankyou so much Sir.
basically if company as a whole makes a loss then we should carry forward again future profits
if we assum only this particular project is loss making but the business as a whole if profitable then we do not carry forward instead calculate a tax savings in the year of loss .
Am I right Sir?
Lastly, with tax working shown separately I meant that examiner does not deduct TAD and then add it back as he shows the working separately , however usually we normally we do show TAD while calculating NPV. So which way is better?
Once again Thankyou Sir. I am really grateful to you.
Your first bit is correct.
As far as the workings are concern it doesn’t matter which way you do it except in the case where it is an investment in another country and there is a tax loss. Then you have to have the tax workings separately because the tax in the year with the loss will be zero and there will be a loss to carry forward against future profits.
Sir qs 50 of bpp kit which is qs Yilandwe is on overseas investment appraisal qs with tax losses eing carried forward. The examiner the tax working with all other calculations. Is that what you meant.
I am really sorry for asking all this but i will be sitting for remote exam and have to practise on spreadsheet in the most efficient way.
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