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Please give guidance on if we should include back to both NP and Cap if there is a difference?
Also for all the Cap employed figures do we bring forward from prior periods?
Thank you in advance
The idea is that accounting depreciation, whether this year’s or relating to previous years, is inappropriate and arbitrary. Instead, economic depreciation should have been used from when the non-current asset had been originally purchased.
Therefore, for NOPAT you have to add back this year’s accounting depreciation charge and deduct this year’s economic depreciation charge (many questions say that these amounts are the same, so there would then be no net adjustment).
For the capital employed you must use the BROUGHT FORWARD amount (ie as at the start of the year) but this might also need to be adjusted by adding back accumulated accounting depreciation and deducting accumulated economic depreciation (as at the start of the period).