Financial Costs – Knowsia

PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

Question

The following details were taken from the records of KK Company Limited for the 2020 year of assessment.

Item	GH¢
Profit before tax	132,000
Total Financial Gain from derivatives	42,000
Total Financial Cost from derivatives	300,000

Required:
i) State what constitutes financial cost from derivatives? (3 marks)
ii) Explain the tax treatment of financial cost from derivatives under a company such as KK Company Limited that is neither a mining nor petroleum company. (2 marks)
iii) Compute and explain the allowable financial cost from derivatives. (3 marks)
iv) Assume all facts are the same except that Financial gain from derivatives is GH¢60,000 and Financial Cost from derivatives is GH¢30,000. Compute and explain the allowable financial cost from derivatives.

Answer

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Tags: Derivatives, Financial Costs, Financial instruments, Tax deductions
Level: Level 2

Topic: Income Tax Liabilities
Series: MAY 2021

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

Question

The following is relevant for the operation of AB Ltd, operating in the upstream petroleum sector for the 2017 year of assessment:

Details	$
Revenue	100,000,000
Cost	80,000,000
Profit	20,000,000

The following additional information forms part of the above:

The revenue includes financial gain from swaps of $1,000,000.
The financial cost of $1,200,000 was added to the cost.
The cost includes depreciation of $200,000.
Research and development (R&D) of $100,000 was added to the cost of operation.
Revenue on 20,000 barrels of oil sold was added to revenue. The price used on the 20,000 barrels was $70 in its tax returns, but the agreed price is now $67, certified by the Petroleum Unit of the Ghana Revenue Authority.
Written down value (WDV) as of 31/12/2016 was $1,800,000 after granting capital allowance the second time as of 2016 year-end. This information is yet to be adjusted.

Required:
i) Compute the tax payable. (6 marks)
ii) Comment on the deductibility of financial cost in petroleum operations. (2 marks)

Answer

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Tags: Capital Allowance, Financial Costs, Petroleum taxation, Tax computation, Taxable Income
Level: Level 3

Topic: Capital allowance, Petroleum operations
Series: NOV 2018

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

Question

You have been invited as a student of Taxation to speak at a stakeholder workshop on mining and mineral operations in the extractive industry. In the letter of invitation, the Organisers indicated that you are to submit a detailed write-up of your presentation on the following issues.

Required:
i) Allowable deduction peculiar to the extractive industry. (3 marks)
ii) Approved Rehabilitation Fund and the tax treatment of contributions into the fund and expenses incurred in respect of rehabilitation under the Income Tax Act, 2015 (Act 896). (3 marks)
iii) The tax treatment of relevant financial costs included in the costs incurred in respect of minerals and mining operations under the Income Tax Act, 2015 (Act 896). (4 marks)

Answer

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Tags: Allowable Deductions, Extractive Industry, Financial Costs, Mining Taxation, Rehabilitation Fund
Level: Level 3

Topic: Minerals and mining
Series: MAR 2024

PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

Question

The following details were taken from the records of KK Company Limited for the 2020 year of assessment.

Item	GH¢
Profit before tax	132,000
Total Financial Gain from derivatives	42,000
Total Financial Cost from derivatives	300,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Derivatives, Financial Costs, Financial instruments, Tax deductions
Level: Level 2

Topic: Income Tax Liabilities
Series: MAY 2021

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

Question

The following is relevant for the operation of AB Ltd, operating in the upstream petroleum sector for the 2017 year of assessment:

Details	$
Revenue	100,000,000
Cost	80,000,000
Profit	20,000,000

The following additional information forms part of the above:

The revenue includes financial gain from swaps of $1,000,000.
The financial cost of $1,200,000 was added to the cost.
The cost includes depreciation of $200,000.
Research and development (R&D) of $100,000 was added to the cost of operation.
Revenue on 20,000 barrels of oil sold was added to revenue. The price used on the 20,000 barrels was $70 in its tax returns, but the agreed price is now $67, certified by the Petroleum Unit of the Ghana Revenue Authority.
Written down value (WDV) as of 31/12/2016 was $1,800,000 after granting capital allowance the second time as of 2016 year-end. This information is yet to be adjusted.

Required:
i) Compute the tax payable. (6 marks)
ii) Comment on the deductibility of financial cost in petroleum operations. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Allowance, Financial Costs, Petroleum taxation, Tax computation, Taxable Income
Level: Level 3

Topic: Capital allowance, Petroleum operations
Series: NOV 2018

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowable Deductions, Extractive Industry, Financial Costs, Mining Taxation, Rehabilitation Fund
Level: Level 3

Topic: Minerals and mining
Series: MAR 2024

Question Tag: Financial Costs

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PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

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PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

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AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

You're reporting an error for "AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance"

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

You're reporting an error for "AT – MAR 2024 – L3 – Q5a – Minerals and Mining"

PT – May 2021 – L2 – Q4a – Income Tax Liabilities

Explain the financial costs from derivatives and the tax treatment of such costs.

You're reporting an error for "PT – May 2021 – L2 – Q4a – Income Tax Liabilities"

AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance

Computation of tax payable for a petroleum company, including adjustments for financial gains, costs, and capital allowances.

You're reporting an error for "AT – Nov 2018 – L3 – Q5a – Petroleum operations, Capital allowance"

AT – MAR 2024 – L3 – Q5a – Minerals and Mining

Discusses allowable deductions, rehabilitation fund treatment, and financial costs in the mining sector.

You're reporting an error for "AT – MAR 2024 – L3 – Q5a – Minerals and Mining"

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