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In calculating the adjusted capital employed for 2007, an amount of $50 was stated under goodwill. I expected the figure to be $5m, representing the goodwill amortisation in 2006 since the reversal of $45m in 2006 was carried over to 2007 as the opening balance of capital employed (ie 340). I would be very grateful to obtain an explanation of this.
Thanks in advance.
Capital employed is a balance sheet figure,
NOPAT is an income statement figure.Here assume Goodwill(GW)is an intangible assets which will add value to business in the future, so it is owned by the company as a kind of capital, then the capital figure should include value of GW, and it should be amortised every years like a fixed asset.
That is the way to think of EVA, because it consider some factors that brings or will bring value to company, and adjust accounting figure PAT to NOPAT more likes cash flow.
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