Asset Impairment and Restructuring Charges Effect on EVA (Economic Value Added)
So I'm trying to rationalize if I should add these back to NOPAT and Invested Capital. Since restructuring charges create a liability until they are the actual cash outlays are made I am thinking that I need to add it back to NOPAT but not IC. For Impairment, I believe I should add it back to NOPAT because it's a non cash charge but should leave it off IC because the asset no longer has value, however this would artificially inflate the EVA as NOPAT is adjusted but not IC. Can anyone shed any light on this?
All up to interpretation. Make sure you look at the history and frequency of these items. Management is generally incentivized to make these types of "non-recurring" charges as large as possible by hiding other expenses in them for the benefit of future periods.
Et non provident libero impedit soluta. Sed debitis vel atque ut.
Natus doloremque possimus aliquam vel. Itaque autem libero deserunt id. Iusto beatae optio incidunt.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...