BLM80535 - Calculating the income amount: Quantifying the income amount: example

In this example, A Ltd is a lessor company that owns a number of printing presses which are leased out under operating leases (and so feature as fixed assets in the balance sheet).

On 31 December 2009

• all the shares in A Ltd are sold by A Holdings Ltd.
• A Ltd acquires a train from group company B Ltd and a lathe from an unconnected party.

The PM figure is primarily derived from the start of the day and, without adjustment, would reflect only the printing presses.

The TWDV is primarily derived from the end of the day and, without the adjustment, would reflect the printing presses, the train and the lathe.

The adjustments bring these figures into line:

• Paragraph 17 (2) brings the train into the PM figure – it is transferred to A Ltd on the relevant day from an associated company.
• Paragraph 18 (2) removes expenditure on the lathe – it is acquired by A Ltd on the relevant day and is not acquired from an associated company.

The adjusted PM and TWDV figures now include the printing presses and the train but not the lathe.

There is no need to adjust for the lathe because it has just been acquired from an unconnected party and the group that owns A Ltd will not have benefited from any capital allowances.