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Dear Tutor,
If tax is paid in arrears, do we deduct (and then add back) the Capital allowance in the same year or subsequent year?
Also, if the discounted CF question doesnt mention about the Capital Maintenance charges, do we continue to add back the depreciation after deducting the tax or are we to assume that an amount equivalent to dep. charge will be the capital maintenance charge and hence don’t add it back?
Hi, is there any difference between the BPP ACCA AFM revision kit 2020 and 2021?
Thanks.
aamir2111: The capital allowances are subtracted from the profits for the same year and then the tax is calculated. The tax that is calculated is payable one year later.
If you are doing the calculation in the statement showing the cash flows, then the capital allowances are added back as they are not a cash flow.These days the examiner does tend to include the statement about capital maintenance and as a result we do not add back the capital allowances. If he doesn’t include the statement then do add it back (some of his earlier answers do not add it back even though the statement was not included, but he does state in his answer that it is an assumption. As always you should always state any assumptions that you make because there is rarely ever just one correct answer.)
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