CFM96450 - Interest restriction: group-EBITDA: capital (fair value movement) adjustment

TIOPA10/418

»Ê¹ÚÌåÓýapp capital (fair value movement) adjustment ensures that where relevant assets are revalued, losses are added to and gains are subtracted from the profit before tax in calculating group-EBITDA. It forms part of the overall depreciation and amortisation adjustment which is added back to profit before tax figure for the period.

»Ê¹ÚÌåÓýapp fair value capital adjustment is the sum of all relevant fair value movements.

A relevant fair value movement is where there is a change in carrying value of a relevant asset that is recognised in determining the group’s profit or loss for the period. »Ê¹ÚÌåÓýapp adjustment amount is positive for revaluation losses and negative for revaluation gains, so these amounts reversed out.

This only includes amounts of a capital nature. Where the revaluations are of a revenue nature then these do not form part of the capital (fair value movement) adjustment.

Note that even where a revaluation gives rise to an increase in value in the asset to an amount greater than historic cost, the amount subtracted in computing group-EBITDA is not restricted. Such a restriction only arises if and when there is a disposal of the relevant asset, see CFM96460.

Further guidance