CFM95920 - Interest restriction: group-interest: net group-interest expense: overview

TIOPA10/S410

The net group-interest expense is the total of the amounts of interest and other financing amounts recognised in the worldwide group’s financial statements in its income statement for a period or account.

It is used in calculating the group-EBITDA by adding it back to profits before tax. It is also used to as the starting point for calculating the adjusted net group-interest expense (ANGIE) which in turn is used for calculating the qualifying net group-interest expense (QNGIE).

It is calculated as:

The amounts included in this calculation are those recognised in the financial statements for the period as items of profit or loss.

Note that this can be a negative amount, representing an amount of net income.

Capitalised interest

Net group-interest expense does not include amounts of capitalised interest and other financing amounts at the time they are capitalised in an asset or liability. This is because the calculation is based on amounts recognised in the income statement.

There are special rules to deal with capitalised interest and other financing amounts that are subsequently recognised in the income statement, for example, by way of depreciation or part of a cost of sale of an asset.

Capitalised interest is not taken into account when capitalised because it is not recognised as an item of profit or loss in the group’s financial statements and therefore will not fall within ‘A’ in S410(1). But, so long as the asset is not a relevant asset, as defined in S417(5), an amount will be included in net group-interest expense in a period if it is:

  • recognised as an item of profit or loss in the group’s financial statements
  • as a result of writing down the carrying value of the asset; and

relates to interest expense that had been capitalised.

S410(5A) confirms that this treatment also applies where interest expense has been capitalised into an intangible fixed asset.