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I want to ask whether tax allowable depreciation is considered as the fixed operational cost, as in some questions in AFM exam the depreciation generally is considered as a fixed operational cost and tax allowable depreciation is referred separately?
TAD is never an operational cost. It reduces the taxable profit. In Paper FM we usually subtracted it in the cash flow summary, then calculated the tax, and then added back the TAD because it is not a cash flow. However it is safer in Paper AFM to calculate the tax in separate workings because often the project is in a foreign country and there may be tax losses which are then carried forward.
I do explain this in my free lectures 🙂TAD is never an operational cost. It reduces the taxable profit. In Paper FM we usually subtracted it in the cash flow summary, then calculated the tax, and then added back the TAD because it is not a cash flow. However it is safer in Paper AFM to calculate the tax in separate workings because often the project is in a foreign country and there may be tax losses which are then carried forward.
What you might be referring to is the fact that very often the Paper AFM examiner states in the question that the cost of maintaining the assets is equal to the TAD, and in this case that amount is an operational expense.
I do explain both of these points in my free lectures 🙂
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