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Hi P5 tutor,
I confused for the answers in past year questions.
In Dec 2012, question 3, Stillwater service, previous year non cash expenses is added back to current year capital employed.
However, in Dec 2007, question 2, Alpha division, other non cash expenses incurred in 2006 is not added to capital employed in 2007.May I know which answer is correct?
Should non cash expenses added back to capital employed?Non-cash expenses (and R&D) should be added back. I think the ACCA Dec 2007 answer is incorrect (previous examiner).
Thanks for your answer.
Do you have more EVA questions to practice?I had tried all past years questions but i feel that my understanding for EVA still insufficient.
Sorry, we don’t have any more. Look at these (if you haven’t already):
June 2008 Q1(a)
December 2007 Q2(b)
December 2010 Q3 (b)
December 2012 Q3 (a)Ya. I had tried those questions and technical articles questions as well.
Thanks for clarify the answer for EVA.but in the June 2011 JHK ques non cash expense was not added back to the capital employed…Right?
The capital employed that you use in NOPAT is the opening capital employed. Non-cash expenses incurred in the period would not affect that.
The capital employed that you use in NOPAT is the opening capital employed. Non-cash expenses incurred in the period would not affect that.
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Work through the examples of ATC provider which also has the issues of replacement costs of capital employed
does this also apply to expenses like depreciation, amortisation of R&D etc incurred during the year? thanks.
hi, i have also questions on EVA (dec 07)
A) goodwill written off against reserves on acquisition in prior to 2006 amounting to $45 and amortization of goodwill of $5 for 2006 and 2007.
for year 2006 agree that $45 should be added back, amortization zero. However for year 2007, shouldn’t the adjustment just be for the amortization of $5? As the $45 should be written off just once in 2006? Sorry I’m a bit confused.
B) non capitalized else should be adjusted in COC. However based on the technical article, it is mentioned that lease payments are to be added back, this refers to the amortization, yes?many thanks.
(A) $45 had been written off as at the start of 2006, so if that had not happened the balance sheet capital employed would be $45 greater.
Another $5 was written off during 2006, so the balance sheet capital employed has to have $50 added back at the end of that year.
(B) If the lease had been treated as an operating lease, lease payments would be debited to income, like rent. If the lease if capitalised, then, to be consistent, the lease payments (rent) have to be added back to income.
A) ok get it, should be cumulative. Thanks!
B) however for ded 2007 past ur q, op lease which was not capitalized was not added in nopat.Back to the discussion on non cash expenses, noted that for June 2011 question 1, non cash exp was not adjusted in the calculation of cost of capital too! Tried reading the question to see if I missed out anything but don’t seem to find any. I’m still confused whether this should b adjusted in COC.
Thanks!
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