- This topic has 3 replies, 2 voices, and was last updated 6 years ago by .
Viewing 4 posts - 1 through 4 (of 4 total)
Viewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.
OpenTuition recommends the new interactive BPP books for March 2025 exams.
Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › economic depreciation
May i ask what is the difference between the accounting depreciation and economic depreciation?
Is that only economic depreciation need to be deducted from the operating profit in the EVA calculation?
Accounting deprecation is just a rather arbitrary rate – 15, 20 or 25% usually.
Economic depreciation is the true reduction in the value of the asset, usually taken as the reduction in earning power of the asset (always supplied in an EVA question).
Add back accounting depreciation and subtract economic depreciation.
will the asset need to deduct the economic depreciation before enter the capital employed?
In principle, yes. However the CE figure in EVA is the opening capital employed, so a depreciation adjustment for the period does not affect that.