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I would like to ask that in a case that divisions has non current assets controlled by Head office, these assets will be excluded when we calculate ROI (also excluding related depreciation).
But, how about the PROFIT/LOSS generating from these non current assets? I was expecting that we will exclude it, too and if the exam does not provide any information about profit/loss generating from these assets, we might assume there is no profit or loss and therefore, do not exclude and just go for the assets. Is that correct?
I am looking forward to your answer.
Thank you very much.
We do exclude the non-current assets that are controlled by the head office.
However when looking at the profit it will be impossible to decide what profit is being generated by which assets. All that will be excluded when calculating the profit will be the depreciation charge on the assets controlled by head office.
Thank you very much for your answer.
So, could it impact the comparison of performance between two divisions as I think if one of two divisions that having more non-current assets controlled by Head office will likely to have higher/ lower profit than it would have been. ( higher/lower if it turned profit/loss)
Is that correct, sir?
Yes, that is correct.