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EVA calculation in Alpha Division(Dec 07)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › EVA calculation in Alpha Division(Dec 07)

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by sunnyfish2001.
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  • November 9, 2011 at 4:54 am #50389
    tsebewuvincent
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    In calculating the adjusted capital employed for 2007, an amount of $50 was stated under goodwill. I expected the figure to be $5m, representing the goodwill amortisation in 2006 since the reversal of $45m in 2006 was carried over to 2007 as the opening balance of capital employed (ie 340). I would be very grateful to obtain an explanation of this.

    Thanks in advance.

    November 25, 2011 at 7:44 am #89463
    sunnyfish2001
    Member
    • Topics: 15
    • Replies: 24
    • ☆

    Capital employed is a balance sheet figure,
    NOPAT is an income statement figure.

    Here assume Goodwill(GW)is an intangible assets which will add value to business in the future, so it is owned by the company as a kind of capital, then the capital figure should include value of GW, and it should be amortised every years like a fixed asset.

    That is the way to think of EVA, because it consider some factors that brings or will bring value to company, and adjust accounting figure PAT to NOPAT more likes cash flow.

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