1. How would you analyze the financial statements of a firm? Explain each step thoroughly.

(Marks 4)

2. Suppose two companies acquire a machinery for use in operations. Company A expenses the transaction whereas, company B capitalizes the same transaction. What repercussions will this have on the financial reporting? (Marks 4)

3. Statement of projected future cash flows is least likely be required by SECP for a company filing for registration. Why? (Marks 2)

4. Hihotech Company reported net income of 2.3 million for the year ended 20XX and had a weighted average of 800,000 common shares outstanding. At the beginning of the fiscal year, the company has option of 30,000 with an average exercise price 35. No potentially dilutive securities are outstanding. Over the fiscal year, the company's market price averaged 55 per share.

(Marks 5)

Required:

a) Calculate company's basic and diluted EPS under IFRS and US GAAP

b) It has been argued that both methods will yield the same results but the underlying justification employed by both methods is different. Explain these justifications.