Reporting of capital employed

AS 843 views 2 replies

Murali subramanian

Service

24 Points Joined August 2008

As per my understanding, Capital Employed equals Shareholders' Funds + Non- Current liabilities or Total Assets less Current Liabilities or Non-current Assets + Working Capital.

However, in recently published audited / unaudited Quarterly / Half-Yearly results of Companies, the representation of Capital Employed is different. In these statements the Capital Employed is shown to be equal to Shareholders' Funds. The Non- Current Liabilities have not been considered in computing the Capital Employed.

Can someone throw light on this please?

Replies (2)

Vivek Hebbar

Partner

406 Points Joined March 2008

The computation depends on the objective of calculating Capital Employed. e.g. CARO (Companies Act) defines capital employed, different banks use different formulae for calculating capital employed.

Milind M. Kulkarni

Practicing CA

589 Points Joined April 2011

If we are talking about total capital employed in a business, it must include Shareholders' funds + Non current liabilities. If the companies mentioned by you have used the capital employed to disclose return on shareholders' funds or percentage of Profit after Tax to capital employed, then it will represent only shareholders' funds. Need to check the context in which these companies have used the term 'Capital employed'.