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question about EVA – Tax deduction

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › question about EVA – Tax deduction

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by Ken Garrett.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 16, 2015 at 5:30 pm #276704
    ursulaanna45
    Member
    • Topics: 33
    • Replies: 47
    • ☆☆

    Hi

    I wanted to ask about how NOPAT is calculated in the answer to Jun’14 Q1 and Dec’12 Q3A
    I am having trouble with Tax adjustment in particular

    I was thinking that when I start from Operating profit, as they did in the answer, I then need to deduct the whole amount for Tax as per figure in P&L but adjusted by Tax cash paid and Tax benefit of interest, but I am getting different answer then

    It seems that in the answer deduction was Tax paid in cash and Tax relief on interest – Tax figure from P&L is not considered at all?

    Would you know why that is the case?

    Thank you

    October 16, 2015 at 6:20 pm #276709
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10597
    • ☆☆☆☆☆

    EVA is quite interested in cash flows (hence adding back non-cash expenses). If there is a difference between tax in the P&L and tax paid, choose tax paid.

    October 16, 2015 at 6:40 pm #276715
    ursulaanna45
    Member
    • Topics: 33
    • Replies: 47
    • ☆☆

    That makes sense, I was thinking I have to somehow combine both figures

    But if I wanted to start with Profit after Tax figure, I know I need to add back Net cost of Interest but what about cash paid tax amount in such case?

    just in case question mentions PAT figure only and then also gives figure for payment of tax done during the year? If that could happen

    Would I need to make any tax related adjustments then?

    Thank you

    October 16, 2015 at 9:11 pm #276734
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10597
    • ☆☆☆☆☆

    As I said, adjust to use tax paid.

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    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘question about EVA – Tax deduction’ is closed to new replies.

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