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hello mr john
I dont understand why the full amounts of provisions are added back to the capital employed ( to get capital employed at start) while we take only the increase/decrease which is added or deducted back from profit to get the NOPAT. Shouldnt we only reflect the decrease or increase in provisions in the capital employed?maybe you could explain to me this illustration:
provision for bad debts was $200 at 1 jan x2, $150 at 31 dec x2 and $250 at 31 dec x3profit after tax for x3 was 4000 and for x2 3000
Capital employed per the sofp was $33500 at 1 jan x2 and $37000 at 1 jan x3would really appreciate if you could explain the adjustment to the capital employed
thx in advanceahh i got my answer from an article.: Items such as provisions, allowances for doubtful debts, deferred tax provisions
and allowances for inventory should be added back to capital employed, since
these represent over-prudence on the part of financial accountants and this
understates the true value of capital employed.
Anyway thx mr Johntechnically its not a p4 article its a p5 one .
https://www.accaglobal.com/content/dam/acca/global/pdf/sa_july11_perfmeasurement.pdf here
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