A) Hatari Plc has decided to dispose of a major division of its business. The related assets qualify to be classified as held for sale in the statement of financial position. The following summary draft statement of profit and loss and other comprehensive income has been prepared:

Hatari Plc: Statement of Profit or Loss and other Comprehensive Income for the year ended 31 December 2020

KShs m

Revenue 800

Cost of sales and expenses (560)

Profit before tax 240

Tax (115)

Profit after tax 125

The divison being disposed of was a component of Hatari Plc and was a major line of business which is now ceasing permanently and in its entirety. The division contributed revenue of KShs 200m, costs of KShs 275m and a tax refund of KShs 15m in the year ended 31 December 2020. These amounts are included in the above figures. The assets to be sold have a combined fair value less costs to sell of KShs 39m below their carrying value. This has not yet been recognized.

Required: Complete the following redrafted Statement of Profit or Loss and Other Comprehensive Income in compliance with IFRS 5. (5 MARKS)

B) Jana Ltds net profit for the year ended December 2020 was KShs 4.6 million and it has 500,000 equity-classified preference shares. Each preference share provides for a cumulative discretionary dividend each year of KShs 1.20 per preference share. On 1 January 2020, Jana Ltd has 1 million ordinary shares outstanding. On 1 July 2020 Jana Ltd issued 200,000 ordinary shares for cash. On 1 September 2020, Jana Ltd issued a further 100,000 shares for cash.

Required: Calculate the basic earnings per share of Jana Ltd as at 31 December 2020. (4 MARKS)

C) An investor purchased two KShs 0.50 par ordinary shares at a market price of Kshs 4 each in Pumwani Ltd on 1 January 2021. On 2 January 2021 Pumwani Ltd offered a 1:2 rights issue (i.e. one new share for every two shares held) at Kshs 3.25 per share. Pumwani reported a net income of KShs 4 million on 31 December 2021.

Required: Calculate the theoretical ex-rights price and the capital gain made by the investor for exercising his rights. (5 MARKS)

D) The following information has been extracted from the published accounts of Pesa Corporation Limited, a company quoted on the Nairobi Stock Exchange.

	Shs.
Net profit after tax and interest	990,000
Less: dividends for the period				740,000
Transfer to reserves	250,000
Accumulated reserves brought forward				810,000
Reserves carried forward				1,060,000
Share capital (Sh.10 par value)			8,000,000
Market price per share now	12

Required

Calculate for Pesa Corporation Limited the following ratios and indicate the importance of each to Miss Hisa, a Shareholder:

i. Earnings per share

ii. Price earnings ratio

iii. Dividend yield

iv. Dividend cover

v. Dividend per share (5 MARKS)

E) International harmonization of accounting standards remains a key agenda of standard setting bodies. Harmonisation efforts begin with understanding the reasons for why various countries use different accounting standards. Briefly explain at least five reasons why various countries have developed different accounting standards from each other. (5 MARKS)

(24 MARKS)