Tax Allowable Depreciation

Although the TAD is not a cash flow (and therefore is added back) if the same amount is spent maintaining the non-current assets then rather than add back the TAD and then subtract the same amount, we might as well just not add back. I do explain this in my free lectures and it is something that the current examiner regularly states in his questions.

Thank you sir. I am confused because although the amount we need for maintenance of the asset is same, would tax savings not be separate? Say we have TAD of 100 and same amount is required for maintenance of NCA so we do not add back the amount. This would necessarily mean that we deducted 100 because it was a relevant cash flow, an expense. But what about the tax saving on TAD? Should we not deduct 200 to show 100 for maintenance expense on NCA and 100 for TAD, then add back 100 (TAD) to get the total effect?

Although you have a valid point, the examiner never considers the fact that the maintenance would be tax allowable. If you did as you have written then you would have to be still given the marks, but the way I explain in the lecture is again the way that the examiner always chooses to show it.

Got it. Thank you so much sir!

You are welcome :-)