188体育

The RS group owns an investment property and this is revalued each period. This was acquired at some time before 1 January 2018 for 拢6m.

Year ended 31 December 2018

At the start of the period the property is included in the group鈥檚 financial statements at a value of 拢4 million.

During the period the group carried out a review of the property. In the light of deteriorating market conditions, the property is be revalued down to 拢2.5 million, an adjustment of 拢1.5m. A revaluation loss of 拢1.5m has been included in calculating the group鈥檚 profit before tax for the period.

The capital (fair value movement) adjustment in respect of the property will be 拢1.5 million. This is the fair value movement for the year and is a positive adjustment so as to add the revaluation loss to profit before tax in computing group-EBITDA.

Year ended 31 December 2019

During the period the market improves significantly and group disposes of the property for 拢7.2 million, incurring disposal costs of 拢0.2 million and recognising a profit on disposal of the asset of 拢4.5 million.

The net capital (disposals) adjustment in respect of the property will be a deduction of 拢(3.5) million. This comprises two elements.

• The accounting profit on disposal of 拢4.5m is included in item B in S419(1) thereby reducing Group-EBITDA.
• The recalculated profit amount is the excess of the relevant proceeds over the relevant cost. The relevant proceeds are the sale price of 拢7.2m less disposal costs of 拢0.2m. The relevant cost, applying is the historic cost of 拢6m. Accordingly the recalculated profit on disposal, included in item C is 拢1 million. This is added in computing group-EBITDA.

The net effect is therefore to subtract 拢4.5m and add 拢1m to profit before tax, as part of the computation of group-EBITDA.

Variant on example 2

Suppose in example 2, the property had been revalued up to 拢7.5m in 2018, rather than down to 拢2.5m.

In the period of account to 31 December 2018, the group鈥檚 consolidated financial statements will recognise a revaluation gain of 拢3.5m. This amount is deducted from the group profit before tax in computing group-EBITDA. There has been no disposal so the adjustment is not restricted by reference to historic cost.

In the period to 31 December 2019, there is now a loss on disposal in the financial statements on disposal of the property of 拢0.5m (net proceeds 拢7m less opening carrying value of 拢7.5m). This is included within item A and added to group profit before tax in computing group-EBITDA.

The gain by reference to historic cost is 拢1m as in the example above and this amount is included within item C and also added to group profit before tax in computing group-EBITDA.

This is an example of an item C adjustment arising in a period in which the financial statements disclose a loss on disposal of a relevant asset. The adjustment ensures that, on a cumulative basis, the correct depreciation and amortisation adjustment (DA) is taken into account as regards the relevant asset in computing group-EBITDA.