Find the following requirements The extent to which the following theories are applied in Jarir Company FOR THE YEAR ENDED DECEMBER 31, 2022 AND INDEPENDENT AUDITORS REPORT

Section : Long-term Sources of Finance

1 Risk and returns.

2 Pecking Order Theory

3 Static Trade-off Theory from the following information:

Section : Working Capital Management

1 Aggressive and conservative theories

2 Aggressive Working Capital theory

3 Conservative Working Capital theory

Section : Dividend policy 1 Dividend Irrelevance Theory 2 Dividend Clientele Theory 3 Bird in Hand Theory 4 Dividend Signalling Theory

General information

Jarir Marketing Company (the "Company) is a Saudi joint stock company formed pursuant to the resolution of the Ministry of Commerce Number 1193 dated Rajab 11, 1421H (corresponding to October 8, 2000) and registered in Riyadh, Kingdom of Saudi Arabia under Commercial Registration Number 1010032264 dated Shaa'ban 18, 1400H (corresponding to July 1, 1980).

The Company's registered office is based in Riyadh. As at December 31, 2022, the Company had 68 retail showrooms (2021: 67 retail showrooms) in the Kingdom of Saudi Arabia and the other Gulf countries, in addition to real estate investments in the Arab Republic of Egypt through Jarir Egypt Real Estate Company SAE.

The objectives of the Company and its subsidiaries (collectively referred to as the Group) include; retail and wholesale trading in office and school supplies, children toys, books, educational aids, office furniture, engineering equipment, computers and computer systems, electronic and electrical devices, maintenance of computers and electronic and electrical devices, sports and scout equipment and paper. It also includes, purchase of residential and commercial buildings and the acquisition of land to construct buildings for sale or lease for the interest of the Company.

The accompanying consolidated financial statements comprise the financial statements of the Company and its following subsidiaries:

JARIR MARKETING COMPANY

(A Saudi Joint Stock Company)

Notes to consolidated financial statements for the year ended December 31, 2022

(All amounts in Saudi Riyals thousands unless otherwise stated)

2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

(ii) Historic cost convention

These consolidated financial statements have been prepared under the historical cost convention, as modified for financial assets at fair value through profit or loss and by using the actuarial basis for end of service benefits, on the accrual basis of accounting.

(iii) Critical accounting estimates and judgments

The preparation of consolidated financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management's experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. Although these estimates and judgments are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. The estimates and assumptions that have a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Impairment test for non-financial assets

Judgment is required in assessing whether certain factors would be considered an indicator of impairment. Management considers both internal and external information to determine whether there is an indicator of impairment present and, accordingly, whether impairment testing is required. When impairment testing is required, discounted cash flow models are used to determine the recoverable amount of respective assets. When market transactions for comparable assets are available, these are considered in determining the recoverable amount of assets. Significant assumptions used in preparing discounted cash flow models include growth rates, expected future cash flows, operating costs, capital expenditures and discount rates. These inputs are based on managements best estimates of what an independent market participant would consider appropriate. Changes in these inputs may alter the results of impairment testing, the amount of the impairment charges recorded in the consolidated statement of income and the resulting carrying values of assets.

(b) Financial assets at fair value through profit or loss (FVTPL)

These financial assets are investments in unquoted equity where insufficient recent information is available to measure fair value and management assessment is that cost represents the best estimate of fair value.

(c) Assumptions for end of service benefits provision

The calculation of end of service benefits provision greatly depends on employees' estimated length of service and their estimated salary at end of service. Such estimates were based on the actuarial assumptions developed by management. Those actuarial assumptions were based on the Group's historical data, recent trends, and management plans and forecasts with respect to salary levels.

Life expectancy is not considered a principal actuarial assumption in measuring end of service benefits provision and therefore, possible changes in life expectancy are not expected to have a significant impact on the level of obligation, especially since only a few employees are assumed to serve until the retirement age. Moreover, changes in life expectancy will affect the estimates related to those employees only if life expectancy becomes less than retirement age and in such cases, the impact is not expected to be significant.

The discount rate was estimated by reference to yields on the governmental bonds, as management assessed that there is no deep market in high quality corporate bonds. The Group used a single discount rate that approximates the estimated timing and amount of benefit payments.

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JARIR MARKETING COMPANY

(A Saudi Joint Stock Company)

Notes to consolidated financial statements for the year ended December 31, 2022

(All amounts in Saudi Riyals thousands unless otherwise stated)

2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

(iii) Critical accounting estimates and judgments (continued)

(d) Provision for impairment of trade receivables

The impairment provision for trade receivables is estimated based on assumptions about risk of default and expected loss rates. The Group uses judgement in making such assumptions and how changes in market and economic factors affect expected credit loss. The Group's judgement is based on the Group's past historical trends, market conditions and forward looking estimates at each reporting date.

(e) Provision for slow moving inventories

Provision for slow moving inventories is maintained at a level considered adequate to provide for potential loss on inventory items. The level of allowance is determined and guided by the Group's policy. An evaluation of inventories, designed to identify potential charges to provision, is performed on a continuous basis throughout the year. Management uses judgment based on the best available facts and circumstances, including but not limited to evaluation of individual inventory items' future utilization. The amount and timing of recorded expenses for any period would therefore differ based on the judgments or estimates made. An increase in provision for slow moving inventories would increase the Group's recorded expenses and decrease current assets.

(f) Determining the lease term

The Group as lessee determines the lease term as the non-cancellable period of a lease, together with both (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. For contracts that include extension and termination options, the Group uses judgement in evaluating whether it is reasonably certain whether to exercise the option to renew or terminate the lease. In doing so, it considers all relevant factors that create an economic incentive for it to exercise the renewal or termination. Those factors include current and expected showroom performance, availability, cost and other terms of substitutes, magnitude of leasehold improvements, length of extension or renewal, and cost of extension or renewal. Following the commencement date, the Group reassesses whether it is reasonably certain to exercise an extension option, or not to exercise a termination option, upon the occurrence of either a significant event or a significant change in circumstances that is within the control of the Group and affects whether it is reasonably certain to exercise an option not previously included in its determination of the lease term, or not to exercise an option previously included in its determination of the lease term.

(iv) New standards, amendment to standards and interpretations that are effective for the current year

There were no new standards issued, however, the following amendments to standards, relevant for the Group, are effective from January 1, 2022 and have been applied by the Group for the first time in its reporting periods commencing on or after January 1, 2022:

1. Amendments to IAS 37: Onerous Contracts - Clarifies the costs of fulfilling a contract.
2. Amendments to IAS 16: Property, Plant and Equipment - Prohibits deducting proceeds from selling

items produced by an asset from the cost of this asset while preparing it for its intended use.

1. Amendments to IFRS 3: Replaces reference to the previous version of the Conceptual Framework for the Preparation and Presentation of Financial Statements, with a reference to the current version of the Conceptual Framework for Financial Reporting issued in 2018, and add an exception to the recognition principle of IFRS 3.

Application of the above amendments by the Group did not have any material effect on the Groups consolidated financial statements.

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JARIR MARKETING COMPANY

(A Saudi Joint Stock Company)

Notes to consolidated financial statements for the year ended December 31, 2022

(All amounts in Saudi Riyals thousands unless otherwise stated)

2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

(v) New IFRS standards, amendments to IFRS standards and interpretations not yet effective

There were no new standards issued, however, the following amendments to standards have been published by IASB that are not yet effective as of December 2022, and where early application is permitted by these amendments the Group has not early adopted them. All these amendments are effective for annual reporting periods beginning on or after January 1, 2023, and all are not expected to have a significant impact on the Groups consolidated financial statements:

1. Amendments to IAS 1: Classification of Liabilities as Current or Non-current
2. Amendments to IAS 8: Definition of accounting estimates, the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors, and the use of measurement techniques and inputs to develop accounting estimates.
3. Amendments to IAS 1 and IFRS Practice Statement 2: Guidance and examples to help entities apply materiality judgements to accounting policy disclosures and replacing the requirement to disclose significant accounting policies with a requirement to disclose material accounting policies.