• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Iron chicken-eva and deferred tax

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Iron chicken-eva and deferred tax

  • This topic has 3 replies, 2 voices, and was last updated 2 years ago by Ken Garrett.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 2, 2022 at 8:41 am #664911
    Aspirant101
    Participant
    • Topics: 5
    • Replies: 10
    • ☆

    Q1
    IN the question it says- “The only R & D spending identified in the last five years was $10m expensed during this year on a new product.
    In the solution no adjustment has been done to the capital employed regarding this
    but shouldn’t there have been an adjustment due to this, being previous year’s value-building expenditure?

    Q2)
    Deferred tax provision:

    An increase in provisions should be added back to NOPAT.
    My question is when we calculate cash taxes we adjust the increase in deferred tax provisions.
    In addition to this; should we also add it back once again to the operating profit since it represents an increase in provision?

    September 3, 2022 at 3:07 pm #665039
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10589
    • ☆☆☆☆☆

    CE for EVA is at the Start of the year. The 10m was spent during the year so does not need to be added back.

    Operating profit is before tax, whether actual or deferred. The tax to be deducted for NOPAT is the tax paid (and an adjustment for lost tax relief on interest payments)

    September 4, 2022 at 6:55 am #665064
    Aspirant101
    Participant
    • Topics: 5
    • Replies: 10
    • ☆

    Thank you for the answer.

    I might have not worded my Q2 properly, What I meant was

    If there is an increase in deferred tax provision in the current year, just like any other increase in provision(allowance for doubtful debts) is added back to operating profit, this increase in deferred tax provision needs to be added back too?

    September 4, 2022 at 7:09 am #665065
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10589
    • ☆☆☆☆☆

    Sorry yes.

    See:

    https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/p5/technical-articles/economic-value-added-part1.html

    which includes:

    “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. Any expenses or income recognised in the income statement in respect of movements in such items should also be removed from NOPAT.”

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • Nashra30 on CIMA E1 Chapter 3 Test
  • azubair on Financial Performance Measurement – ACCA Performance Management (PM)
  • j.akshaya on Group SFP – Example (Basic consolidation) – ACCA Financial Reporting (FR)
  • rishitxx on ACCA BT Chapter 1 – The nature and structure of organisations – Questions
  • singhjyoti on Basic group structures – SPLOCI introduction and example – ACCA (SBR) lectures

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in