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August 18, 2022 at 3:30 pm
At approximately 12:44, why do we only subtract 1 years worth of amortisation? For example, the 40 R&D capitalised ; should this not be amortised over the 2 years? Or is the rule simply capital all the expenditure and then amortise only 1 years worth regardless of how many years previously the expense was incurred.
Hope that makes sense! Thank you
Ken Garrett says
March 1, 2021 at 7:18 am
We make a ‘false adjustment’ for R&D for the purposes of EVA. For tax the R&D it is still an expense so gives rise to some tax relief.
For NOPAT we want the position that would exist if before interest and therefore before any tax relief on interest.
Anyhow…that’s the way its done!
March 1, 2021 at 3:58 am
Good talk through but why do we not consider tax savings on the R&D reversal as we did with the Finance cost?
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