Question Tag: Carryover losses

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AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

Cradle Ltd, a company based in the United Kingdom, has proposed to acquire interest in Mamen Ltd, a company incorporated in Ghana and engaged in the sale of ceramics in Ghana. As part of Cradle Ltd’s investigation to acquire Mamen Ltd, the following financial indicators caught the attention of the management of Cradle Ltd:

  1. The company has large staff numbers made up of fresh graduates and employees with enormous work experience.
  2. There is a bad debt in the books of Mamen Ltd amounting to GH¢20 million.
  3. The company has a financial cost from arbitrage arrangements amounting to GH¢14 million.
  4. Tax loss unrelieved and unexpired was GH¢2 million.
  5. According to the Accountant, carryover loss amounted to GH¢1 million.

Required:
Evaluate the tax impact of the above financial indicators on the operations of Cradle Ltd and advise the management of Cradle Ltd on how to reduce its tax exposure if any.

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AT – July 2023 – L3 – Q2a – Mergers, amalgamation, and reorganization

Evaluating the tax impact of acquiring interest in a Ghanaian company and strategies to reduce tax exposure

Cradle Ltd, a company based in the United Kingdom, has proposed to acquire interest in Mamen Ltd, a company incorporated in Ghana and engaged in the sale of ceramics in Ghana. As part of Cradle Ltd’s investigation to acquire Mamen Ltd, the following financial indicators caught the attention of the management of Cradle Ltd:

  1. The company has large staff numbers made up of fresh graduates and employees with enormous work experience.
  2. There is a bad debt in the books of Mamen Ltd amounting to GH¢20 million.
  3. The company has a financial cost from arbitrage arrangements amounting to GH¢14 million.
  4. Tax loss unrelieved and unexpired was GH¢2 million.
  5. According to the Accountant, carryover loss amounted to GH¢1 million.

Required:
Evaluate the tax impact of the above financial indicators on the operations of Cradle Ltd and advise the management of Cradle Ltd on how to reduce its tax exposure if any.

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