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Hi Ken
Sorry me again , could you please explain the reason for adding in half the marketing costs to the EVA figure in part III 3819000, was given as note 8
Would the marketing costs not have been included already in the 7638.000 in appendix 1
and the estimates not included until year end ?/
Thanks million
Liz
All the marketing costs have been deducted in Appendix 1. This is in line with normal accounting practice which regards these costs as expenses. This is a prudent approach to measuring profits.
However, the EVA approach regards many marketing costs and research costs as investments for the future so it is normal to add those back – particularly i, as here, we are told that 50% are for building the brand long-term.
These costs are therefore added back to P&L and also capitalised. No adjustment is needed here in the capital employed because EVA always uses the opening capital employed. Had marketing costs such as these been written off in previous years then they would be added back to capital employed so that they are treated as an asset rather than an expense.
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