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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Accenture PLC, economic profit calculation

US$ in thousands

12 months ended:	Aug 31, 2020	Aug 31, 2019	Aug 31, 2018	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015
Net operating profit after taxes (NOPAT)¹	6,009,567	4,992,768	4,379,754	3,464,480	4,759,039	2,672,791
Cost of capital²	11.92%	11.74%	11.69%	11.64%	11.68%	11.71%
Invested capital³	22,846,720	20,110,534	17,518,702	15,863,332	13,925,443	11,386,734

Economic profit⁴	3,286,931	2,631,872	2,332,441	1,617,397	3,132,776	1,339,707

Based on: 10-K (filing date: 2020-10-22), 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 6,009,567 – 11.92% × 22,846,720 = 3,286,931

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Accenture PLC’s economic profit increased from 2018 to 2019 and from 2019 to 2020.

Accenture PLC, NOPAT calculation

US$ in thousands

12 months ended:	Aug 31, 2020	Aug 31, 2019	Aug 31, 2018	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015
Net income attributable to Accenture plc	5,107,839	4,779,112	4,059,907	3,445,149	4,111,892	3,053,581
Deferred income tax expense (benefit)¹	170,951	(96,360)	94,000	(364,133)	65,940	(459,109)
Increase (decrease) in allowances for client receivables²	(5,261)	(4,375)	(24,537)	(4,990)	9,275	(12,478)
Increase (decrease) in deferred revenues³	573,613	298,253	123,038	213,228	343,468	(116,793)
Increase (decrease) in equity equivalents⁴	739,303	197,518	192,501	(155,895)	418,683	(588,380)
Interest expense	33,071	22,963	19,539	15,545	16,258	14,578
Interest expense, operating lease liability⁵	143,793	—	—	—	—	—
Adjusted interest expense	176,864	22,963	19,539	15,545	16,258	14,578
Tax benefit of interest expense⁶	(37,141)	(4,822)	(5,022)	(5,441)	(5,690)	(5,102)
Adjusted interest expense, after taxes⁷	139,722	18,141	14,517	10,104	10,568	9,476
Interest income	(69,331)	(87,508)	(56,337)	(37,940)	(30,484)	(33,991)
Investment income, before taxes	(69,331)	(87,508)	(56,337)	(37,940)	(30,484)	(33,991)
Tax expense (benefit) of investment income⁸	14,560	18,377	14,479	13,279	10,669	11,897
Investment income, after taxes⁹	(54,771)	(69,131)	(41,858)	(24,661)	(19,815)	(22,094)
Net income (loss) attributable to noncontrolling interest	77,474	67,129	154,687	189,783	237,711	220,208
Net operating profit after taxes (NOPAT)	6,009,567	4,992,768	4,379,754	3,464,480	4,759,039	2,672,791

Based on: 10-K (filing date: 2020-10-22), 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances for client receivables.

³ Addition of increase (decrease) in deferred revenues.

⁴ Addition of increase (decrease) in equity equivalents to net income attributable to Accenture plc.

⁵ 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,423,641 × 4.20% = 143,793

⁶ 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 176,864 × 21.00% = 37,141

⁷ Addition of after taxes interest expense to net income attributable to Accenture plc.

⁸ 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 69,331 × 21.00% = 14,560

⁹ Elimination of after taxes investment income.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Accenture PLC’s NOPAT increased from 2018 to 2019 and from 2019 to 2020.

Accenture PLC, cash operating taxes calculation

US$ in thousands

12 months ended:	Aug 31, 2020	Aug 31, 2019	Aug 31, 2018	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015
Income tax expense	1,589,018	1,405,556	1,593,499	981,100	1,253,969	1,136,741
Less: Deferred income tax expense (benefit)	170,951	(96,360)	94,000	(364,133)	65,940	(459,109)
Add: Tax savings from interest expense	37,141	4,822	5,022	5,441	5,690	5,102
Less: Tax imposed on investment income	14,560	18,377	14,479	13,279	10,669	11,897
Cash operating taxes	1,440,649	1,488,362	1,490,042	1,337,395	1,183,050	1,589,055

Based on: 10-K (filing date: 2020-10-22), 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30).

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Accenture PLC’s cash operating taxes decreased from 2018 to 2019 and from 2019 to 2020.

Accenture PLC, invested capital calculation (financing approach)

US$ in thousands

	Aug 31, 2020	Aug 31, 2019	Aug 31, 2018	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015
Current portion of long-term debt and bank borrowings	7,820	6,411	5,337	2,907	2,773	1,848
Long-term debt, excluding current portion	54,052	16,247	19,676	22,163	24,457	25,587
Operating lease liability¹	3,423,641	3,839,556	3,651,481	3,706,874	2,817,304	2,454,523
Total reported debt & leases	3,485,513	3,862,214	3,676,494	3,731,944	2,844,534	2,481,958
Total Accenture plc shareholders’ equity	17,000,536	14,409,008	10,364,753	8,949,477	7,555,262	6,133,725
Net deferred tax (assets) liabilities²	(3,973,443)	(4,216,232)	(1,961,078)	(2,077,803)	(1,966,292)	(1,998,556)
Allowances for client receivables³	40,277	45,538	49,913	74,450	79,440	70,165
Deferred revenues⁴	4,327,672	3,754,059	3,455,806	3,332,768	3,119,540	2,776,072
Equity equivalents⁵	394,506	(416,635)	1,544,641	1,329,415	1,232,688	847,681
Accumulated other comprehensive (income) loss, net of tax⁶	1,561,837	1,840,577	1,576,171	1,094,784	1,661,720	1,411,972
Noncontrolling interests	498,637	418,683	359,835	760,723	634,114	513,846
Adjusted total Accenture plc shareholders’ equity	19,455,516	16,251,633	13,845,400	12,134,399	11,083,784	8,907,224
Short-term investments⁷	(94,309)	(3,313)	(3,192)	(3,011)	(2,875)	(2,448)
Invested capital	22,846,720	20,110,534	17,518,702	15,863,332	13,925,443	11,386,734

Based on: 10-K (filing date: 2020-10-22), 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenues.

⁵ Addition of equity equivalents to total Accenture plc shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of short-term investments.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Accenture PLC’s invested capital increased from 2018 to 2019 and from 2019 to 2020.

Accenture PLC, cost of capital calculations

	Capital (fair value)¹	Weights					Cost of capital
Equity²	144,662,081	144,662,081	÷	148,147,594	=	0.98	0.98	×	12.13%	=	11.84%
Outstanding debt³	61,872	61,872	÷	148,147,594	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	3,423,641	3,423,641	÷	148,147,594	=	0.02	0.02	×	4.20% × (1 – 21.00%)	=	0.08%
Total:	148,147,594					1.00					11.92%

Based on: 10-K (filing date: 2020-10-22).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	117,472,267	117,472,267	÷	121,334,481	=	0.97	0.97	×	12.13%	=	11.74%
Outstanding debt³	22,658	22,658	÷	121,334,481	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	3,839,556	3,839,556	÷	121,334,481	=	0.03	0.03	×	0.00% × (1 – 21.00%)	=	0.00%
Total:	121,334,481					1.00					11.74%

Based on: 10-K (filing date: 2019-10-29).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	97,842,277	97,842,277	÷	101,518,771	=	0.96	0.96	×	12.13%	=	11.69%
Outstanding debt³	25,013	25,013	÷	101,518,771	=	0.00	0.00	×	0.00% × (1 – 25.70%)	=	0.00%
Operating lease liability⁴	3,651,481	3,651,481	÷	101,518,771	=	0.04	0.04	×	0.00% × (1 – 25.70%)	=	0.00%
Total:	101,518,771					1.00					11.69%

Based on: 10-K (filing date: 2018-10-24).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	90,182,783	90,182,783	÷	93,914,727	=	0.96	0.96	×	12.13%	=	11.64%
Outstanding debt³	25,070	25,070	÷	93,914,727	=	0.00	0.00	×	0.00% × (1 – 35.00%)	=	0.00%
Operating lease liability⁴	3,706,874	3,706,874	÷	93,914,727	=	0.04	0.04	×	0.00% × (1 – 35.00%)	=	0.00%
Total:	93,914,727					1.00					11.64%

Based on: 10-K (filing date: 2017-10-26).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	74,281,472	74,281,472	÷	77,126,006	=	0.96	0.96	×	12.13%	=	11.68%
Outstanding debt³	27,230	27,230	÷	77,126,006	=	0.00	0.00	×	0.00% × (1 – 35.00%)	=	0.00%
Operating lease liability⁴	2,817,304	2,817,304	÷	77,126,006	=	0.04	0.04	×	0.00% × (1 – 35.00%)	=	0.00%
Total:	77,126,006					1.00					11.68%

Based on: 10-K (filing date: 2016-10-28).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	69,476,448	69,476,448	÷	71,958,406	=	0.97	0.97	×	12.13%	=	11.71%
Outstanding debt³	27,435	27,435	÷	71,958,406	=	0.00	0.00	×	0.00% × (1 – 35.00%)	=	0.00%
Operating lease liability⁴	2,454,523	2,454,523	÷	71,958,406	=	0.03	0.03	×	0.00% × (1 – 35.00%)	=	0.00%
Total:	71,958,406					1.00					11.71%

Based on: 10-K (filing date: 2015-10-30).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

Accenture PLC, economic spread ratio calculation, comparison to benchmarks

	Aug 31, 2020	Aug 31, 2019	Aug 31, 2018	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit¹	3,286,931	2,631,872	2,332,441	1,617,397	3,132,776	1,339,707
Invested capital²	22,846,720	20,110,534	17,518,702	15,863,332	13,925,443	11,386,734
Performance Ratio
Economic spread ratio³	14.39%	13.09%	13.31%	10.20%	22.50%	11.77%
Benchmarks
Economic Spread Ratio, Competitors⁴
Automatic Data Processing Inc.	16.41%	14.38%	12.55%	13.84%	9.65%	11.22%
Waste Management Inc.	1.04%	1.52%	4.37%	3.28%	1.31%	—

Based on: 10-K (filing date: 2020-10-22), 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,286,931 ÷ 22,846,720 = 14.39%

⁴ Click competitor name to see calculations.

Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Accenture PLC’s economic spread ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Accenture PLC, economic profit margin calculation, comparison to benchmarks

	Aug 31, 2020	Aug 31, 2019	Aug 31, 2018	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit¹	3,286,931	2,631,872	2,332,441	1,617,397	3,132,776	1,339,707

Revenues	44,327,039	43,215,013	41,603,428	36,765,478	34,797,661	32,914,424
Add: Increase (decrease) in deferred revenues	573,613	298,253	123,038	213,228	343,468	(116,793)
Adjusted revenues	44,900,652	43,513,266	41,726,466	36,978,706	35,141,129	32,797,631
Performance Ratio
Economic profit margin²	7.32%	6.05%	5.59%	4.37%	8.91%	4.08%
Benchmarks
Economic Profit Margin, Competitors³
Automatic Data Processing Inc.	10.80%	9.64%	6.88%	8.40%	6.54%	6.27%
Waste Management Inc.	1.63%	2.22%	5.39%	4.00%	1.65%	—

Based on: 10-K (filing date: 2020-10-22), 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30).

¹ Economic profit. See details »

² 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 3,286,931 ÷ 44,900,652 = 7.32%

³ Click competitor name to see calculations.

Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Accenture PLC’s economic profit margin improved from 2018 to 2019 and from 2019 to 2020.

Accenture PLC (NYSE:ACN)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin