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ROI calculation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › ROI calculation

  • This topic has 3 replies, 2 voices, and was last updated 7 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 11, 2021 at 1:00 pm #640423
    harlan07
    • Topics: 3
    • Replies: 3
    • ☆

    Dear,

    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.

    November 11, 2021 at 4:12 pm #640437
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49628
    • ☆☆☆☆☆

    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.

    November 13, 2021 at 8:39 pm #640583
    harlan07
    • Topics: 3
    • Replies: 3
    • ☆

    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?

    November 14, 2021 at 7:36 am #640594
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49628
    • ☆☆☆☆☆

    Yes, that is correct.

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