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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!
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.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?
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.
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