Calculate the for Part (B) 1. a schedule that calculates net cash generated from operating activities to correct any errors above 2. a reconciliation from net cash generated by operating activities to operating free cash flow (as described in note (vi) above)

(a) Toobasco is in the retail industry. In the reporting of financial information, the directors have disclosed several alternative performance measures (APMS), other than those defined or specified under International Financial Reporting Standards. The directors have disclosed the following APMS: (i) 'Operating profit before extraordinary items' is often used as the headline measure of the Group's performance, and is based on operating profit before the impact of extraordinary items. Extraordinary items relate to certain costs or incomes which are excluded by virtue of their size and are deemed to be nonrecurring. Toobasco has included restructuring costs and impairment losses in extraordinary items. Both items had appeared at similar amounts in the financial statements of the two previous years and were likely to occur in future years. (ii) 'Operating free cash flow' is calculated as cash generated from operations less purchase of property, plant and equipment, purchase of own shares, and the purchase of intangible assets. The directors have described this figure as representing the residual cash flow in the business but have given no detail of its calculation. They have emphasised its importance to the success of the business. They have also shown free cash flow per share in bold next to earnings per share in order to emphasise the entity's ability to turn its earnings into cash. (iii) 'EBITDAR' is defined as earnings before interest, tax, depreciation, amortisation and rent. EBITDAR uses operating profit as the underlying earnings. In an earnings release, just prior to the financial year end, the directors disclosed that EBITDAR had improved by $180 million because of cost savings associated with the acquisition of an entity six months earlier. The directors discussed EBITDAR at length describing it as 'record performance' but did not disclose any comparable IFRS information and there was no reconciliation to any IFRS measure. In previous years, rent had been deducted from the earnings figure to arrive at this APM. (iv) The directors have not taken any tax effects into account when calculating the remaining APMS. Required: Advise the directors whether the above APMs would achieve fair presentation in the financial statements. (10 marks) (b) Daveed is a car retailer who leases vehicles to customers under operating leases and often sells the cars to third parties when the lease ends. Net cash generated from operating activities for the year ended 31 August 208 for the Daveed Group is as follows: Cash generated from operating activities was calculated using the indirect method. Net cash flows generated from investing activities included interest received of $10 million and net capital expenditure of S46 million excluding the business acquisition at (iii) below. There were also some errors in the presentation of the statement of cash flows which could have an impact on the calculation of net cash generated from operating activities. The directors have provided the following information as regards any potential errors: (i) Cars are treated as property, plant and equipment when held under operating leases and when they become available for sale, they are transferred to inventory at their carrying amount. In its statement of cash flows for the year ended 31 August 208, cash flows from investing activities included cash inflows relating to the disposal of cars ( $30 million). (ii) On 1 September 207, Daveed purchased a 25% interest in an associate for cash. The associate reported a profit after tax of $16 million and paid a dividend of $4 million out of these profits in the year ended 31 August 20x8. As can be seen in the calculation above, the directors included a figure of $12 million when calculating net cash generated from operating activities. The associate was correctly recorded at $23 million in the statement of financial position at 31 August 208 and profit for the year of $4 million was included in the statement of profit or loss. No adjustment was made for Daveed's share of the associate's profit when calculating cash generated from operating activities. (iii) Daveed also acquired a digital mapping business during the year ended 31 August 20x8. The statement of cash flows showed a loss of $28 million in net cash inflow generated from operating activities as the effect of changes in foreign exchange rates arising on the retranslation of this overseas subsidiary. The assets and liabilities of the acquired subsidiary had been correctly included in the calculation of the cash movement during the year. (iv) During the year to 31 August 20x8, Daveed made exceptional contributions to the pension plan assets of $33 million but the statement of cash flows had not recorded the cash tax benefit of 56 million. (v) Additionally, Daveed had capitalised the interest paid of $25 million into property, plant and equipment ( $18 million) and inventory (\$7 million). (vi) Daveed has defined operating free cash flow as net cash generated by operating activities as adjusted for net capital expenditure, purchase of associate and dividends received, interest received and paid. Any exceptional items should also be excluded from the calculation of free cash flow