Company A had been making a provision for repairs to its dry-dock facilities and these had been allowable for tax purposes. It adopted FRS12 Provisions, contingent liabilities and contingent assets and FRS15 Tangible fixed assets in its accounting period to 30 June 1999. It made a prior period adjustment to add back the repairs provision and another adjustment to depreciation on the assets. (These adjustments may net to nil, or only produce a small net prior period adjustment.) The amount of the prior period adjustment for the previously allowable repairs provision is chargeable to tax, but the prior period adjustment for depreciation is a capital adjustment and is not allowable for tax purposes. Any net figure in the accounts will have to be disaggregated. As the period of account ended after 6 April 1999 the provisions of FA98/SCH6 apply and the charge is under Case VI.
Company B, a precious metal and gem supplier to the jewellery trade decides that it would be more appropriate to value stock at fair value rather than on an historic cost basis. The change is made in the accounts for the year ended 31 December 2000. Opening stock at 1 January 2000 is valued at £938,000, whereas closing stock at 31 December 1999 was £728,333. The adjustment is taxable under FA98/SCH6 under Case VI. If the accounting period of change had ended after 1 August 2001 the provisions of FA02/SCH22 would apply, with the spreading provisions in paragraphs 8 and 9.
