Forums › ACCA Forums › ACCA APM Advanced Performance Management Forums › Arkaig Amortization
- This topic has 3 replies, 4 voices, and was last updated 4 months ago by mrjonbain.
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- August 8, 2022 at 7:46 am #662631
In the question Arkaig
The operating profit was $3175m.Amortization charges of $95m in the year have been incurred.
In the answers,
Operating profit =3175
add back:amortization =95But in the kaplan book it is given that we have to deduct amortization for the period.
Why do we add it back?
Thanks.February 19, 2024 at 4:18 pm #700685Any update on this?
June 24, 2024 at 1:46 pm #707586You don’t add it back, you replace it with the economic depreciation. In the EVA calculation, one of the steps is to add back amortization/depreciation to NOPAT, then deduct economic depreciation instead. If you look at the Kaplan answer, you will see this is what they have done.
If economic depreciation is not given in the question, no adjustment for depreciation/amortization is required.
June 24, 2024 at 2:43 pm #707590I would urge people coming across this thread to also see the following-
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