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Question on EVA

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Question on EVA

  • This topic has 5 replies, 2 voices, and was last updated 13 years ago by musicyy.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • April 2, 2012 at 2:14 am #52073
    musicyy
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    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

    April 2, 2012 at 3:24 pm #96020
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10595
    • ☆☆☆☆☆

    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.

    April 4, 2012 at 5:48 am #96021
    musicyy
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    Got it, like provisions, accrued expenses – non deductible for tax purposes.

    Thank you very much!!

    Have a nice day:)

    April 4, 2012 at 6:06 am #96022
    musicyy
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    Sorry, one more question:
    in this case, is it need to be added back to capital employed?
    Thanks!

    April 4, 2012 at 6:41 am #96023
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10595
    • ☆☆☆☆☆

    If these are not real expenses then retained earnings would be greater.

    April 15, 2012 at 7:17 am #96024
    musicyy
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    thank you!

  • Author
    Posts
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