Just doing some revision for the ICB Self Assessment and I've been looking at the practice questions on the ACCA F6 from Open Tuition (I know they are much more depth than I need but its giving me some practice). However, I've come across something which looks different in my ICB Self assessment Ideal Schools workbook and the ACCA F6 notes:
Ideal schools state that only "actual bad debt written off" is allowable expense
ACCA F6 states "Irrecoverable debt (trade debt write off & allowances) are allowable, just non trade debts written off are not.
Can someone just clarify this for me. I have emailed Ideal Schools, but its the weekend so prob wont get an answer until tomorrow/Tues.
It probably wont even come up in the exam, but I look at this studying as to what I am going to need to know in the "real world" rather than what I need to know to pass the exam!
Taking a basic scenario where there is inter company trade between a parent and subsidiary then a bad debt between the related companies would not be allowable as it is a paper rather than actual debt.
looking at the wording of the Ideal schools line they do state "actual" bad debt rather than perceived bad debt as inter company transactions would be so whilst I can see how the difference between the two descriptions could be misleading the wording of the Ideal documentation is not actually wrong.
I think that you've adopted a great learning style there Lyndsey which took me a while to adapt but yourself and Neil (spamkebab) seem to have gone stright to it.
Basically, if your studying for AAT / ICB look at ACCA.
If your studying towards ACCA F6 study the materials for P6.
Basically follows the principle that if you want a dog start out by trying to get a horse.
happy studying,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just want to check that bad debt "allowance" is the same as a "provision"?
If it is Ideal Schools response has stated the opposite:
"The rules for Bad debt provision or debtors allowances differ from accounting practise and tax rules. For tax purposes they are not usually allowed."
"The Accountants standards committee(of senior accounting bodies) stipulates that provisions whether for stock or bad debt provisions cannot be treated as an expense.
Rule BIM46555 states it must be accurately calculated. However the accountancy bodies have determined that a provision (which may or may not happen) is not accurate."
I think that you may be getting mixed up between a general provision for doubtful debt and a specific provision for bad debt. (allowance and provision can indeed but used interchangably)
If a debt is proven to be bad then it is a specific provision and is allowable both in the accounts and the tax computation (The actual Bim you need is BIM42701)
A generalised provision for doubtful debt in the accounts would not be allowable for tax purposes. And indeed, in the post Enron world care must be excercised when including doubtful debt provisions in the accounts as that is a form of financial statement manipulation.
Under UKGAAP take a look at paragraph 38 of FRS18 (which talks of making excessive provisions)and also FRS12 (Provisions, contingent liabilities and contingent assets)
Under international standards refer to IAS37 (Provisions, contingent liabilities and contingent assets).
Where did you get the line from " provisions whether for stock or bad debt provisions cannot be treated as an expense" as it feels as though there should be more to that statement.
The accounting standards committee (ASC) was actually superseded by the Accounting Standards Board (ASB) in 1990 so you may be accessing some old materials.
If you give me a link to the materials I'll check it out,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
