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Sir,
Please can you explain Example 3: Adam from Technical Article – 1?
Particularly I did not get the Capital Employed adjustments for Project X, non-cash expense.
Why did we not add back 15K in 2009 for non-cash exp and why did we add back whole 1500k in 2009 for Project X. Also we did not add back 500k for Project Z in 2009?Thank you.
hello , yu take capital employed at start for any adjust.. So if the event exist/happen at the start of the year so yu should adj. If it happen during the year that mean it was not there at start so no.adj needed.
Non cash expenses: add back to both profits. However, the capital employes is the opening capital employed ie at the start of 2009 and 2010. We don’t know if there were non-cash expenses in 2008 to add back to get the capital employes at 1/1/2009.
Project X should not have bee written off in 2008, so that would increase the capital employes as at 1/1/2009.
Same for project Z. It only started in 2009 so won’t have affected opening capital employed as at 1/1/2009.
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