june 2010 (SFS)

one of the meanings of ‘implicit’ is ‘contained in the nature of something though not readily apparent’. In a way, hidden.

So the implicit value of an activity means that an activity might have a value that is not readily identified, though the activity can be costed. So, it has a cost but the value might not be easily seen and therefore mistakes could be made.

For example, many airlines have became very strict about carry-on baggage, but too strict a reaction can drive customers away. The activity of allowing staff some discretion has an implicit value in improving custoemr realations and loyalty.

One more question. In EVA calculation of capital employed we will Increase C.E by last years expenditure on advertising R&D and employee training to bring it to this year’s op bal.

Correct

But what about this year’s expenditure we will add it too or not because we want op balance???

No. If you want the opening balance of CE a at 1/1/2015, nothing that happens during 2015 can affect that, so there is no need to add, say, R&D written off during 2015.

Courage!!!