- This topic has 5 replies, 2 voices, and was last updated 10 years ago by
musicyy.
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musicyy
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Dear Sir,
Thank you so much for the free lecture which really helpful!
Just one question on Example 5 Chapter 10 – EVA:
When calculating adjusted profit for EVA, we add back “after tax interest”, but “before tax non-cash expenses”. Just wonder why there is no need to exclude the tax benefit on non-cash expenses. Why we use different tax approach towards interest expenses against non-cash expenses?
Hope to hear from you soon. Thank you!
Best regards,
Music
Ken Garrett
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Whereas interest definitely attracts tax relief, it is unlikely that non-cash expenses would. The reason for adding these back is that they are not ‘real’ expenses, so are therefore unlikely to be allowed for tax.
musicyy
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Got it, like provisions, accrued expenses – non deductible for tax purposes.
Thank you very much!!
Have a nice day:)
musicyy
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Sorry, one more question:
in this case, is it need to be added back to capital employed?
Thanks!Ken Garrett
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If these are not real expenses then retained earnings would be greater.
musicyy
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thank you!
Ken Garrett- You must be logged in to reply to this topic.