CIRD44650 - Intangible assets: FA15 and F2A 2015 rules for goodwill and relevant assets: FA15 - computational examples

Examples

The following examples show how to calculate trading and non-trading debits where a company disposes of a relevant asset that includes third party acquisition costs.

In the first example the asset acquired is not subject to a tax cost adjustment. The second example includes a tax cost adjustment e.g. a market value adjustment because the accounting value of the goodwill recognised exceeds the market value.

Example 1

Loss on disposal

  • Accounting cost of goodwill (CE): 拢280,000
  • Tax adjusted cost of Goodwill (E/ECEA): 拢280,000
  • Third party acquisition value (RAVTPA): 拢70,000
  • AM = RAVTPA/CEA: 0.25
Year Accounting debit Unrestricted debit S849C(2) debit Year end accounting value Year end notional TWDV Year end actual TWDV
Year 1 拢28,000 拢28,000 拢7,000 拢252,000 拢252,000 拢273,000
Year 2 拢56,000 拢56,000 拢14,000 拢196,000 拢196,000 拢259,000
Year 3 拢56,000 拢56,000 拢14,000 拢140,000 拢140,000 拢245,000

Relief under Chapter 4 for disposal in year 4

  • Sale proceeds: 拢80,000
  • Accounting loss: 拢60,000 (sale proceeds (拢80,000) minus AV (拢140,000)
  • Trading debit: 拢60,000 (D x AM); where D is calculated using notional TWDV
  • S849C(4): 拢15,000
  • Non trading debit: 拢165,000 (D - TD); where D is calculated using actual TWDV
  • S849C(5): 拢150,000

Example 2

Loss on disposal with adjusted tax cost

  • Accounting cost of goodwill (CE): 拢400,000
  • Tax adjusted cost of goodwill (E/CEA): 拢200,000
  • Third party acquisition value (RAVTPA): 拢50,000
  • AM = RAVTPA/CEA: 0.25
Year Accounting debit Unrestricted debit S849C(2) debit Year end accounting value Year end notional TWDV Year end actual TWDV
Year 1 拢80,000 拢40,000 拢10,000 拢320,000 拢160,000 拢190,000
Year 2 拢80,000 拢40,000 拢10,000 拢240,000 拢120,000 拢180,000
Year 3 拢80,000 拢40,000 拢10,000 拢160,000 拢80,000 拢170,000

Relief under Chapter 4 for disposal in year 4

  • Sale proceeds: 拢60,000
  • Accounting loss: 拢100,000 (sale proceeds (拢60,000) minus AV (拢160,000)
  • Trading debit: 拢20,000 (D x AM); where D is calculated using notional TWDV
  • S849C(4): 拢5,000
  • Non trading debit: 拢110,000 (D - TD); where D is calculated using actual TWDV
  • S849C(5): 拢105,000