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Tax allowable depreciation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Tax allowable depreciation

  • This topic has 5 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • June 2, 2014 at 7:42 am #172541
    peilin
    Member
    • Topics: 8
    • Replies: 19
    • ☆

    Hi John,

    I would like to ask if the case scenario didn’t mention about tax allowable depreciation, should I treat the depreciation as tax allowable and use “Profit after depreciation” to calculate the taxation?
    Or should I add the depreciation back to the profit before tax and then use the “Profit before depreciation” to calculate the tax?

    Many thanks!

    June 2, 2014 at 12:09 pm #172601
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I really cannot ever remember a question that did not give you information about capital allowances (tax allowable depreciation).
    If it did happen then make an assumption (that the accounts depreciation equals the tax allowable deprecation) and write down your assumption.
    It is however extremely unlikely that it would not be mentioned somewhere in the question.

    June 2, 2014 at 1:03 pm #172627
    peilin
    Member
    • Topics: 8
    • Replies: 19
    • ☆

    Thank you John! 🙂

    In June’13 Q4 part (c), it mentioned that the profit before tax is 23% of sale revenue and it charges depreciation on a straight-line basis on its non-current assets of $220 million. So, it means the depreciation is tax allowable?

    June 2, 2014 at 3:08 pm #172674
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Well that shows what a bad memory I have 🙂

    Yes – in that question you were not told anything about capital allowances and so you were assuming that the accounting depreciation was tax allowable.

    June 2, 2014 at 4:15 pm #172740
    peilin
    Member
    • Topics: 8
    • Replies: 19
    • ☆

    Thanks so much John!! 🙂

    June 2, 2014 at 4:31 pm #172760
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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