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

TIOPA10/418

The 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.

The 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. The 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