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