Question
Kenya Airways (KQ) net operating losses for the year 2020 has nearly tripled to Ksh36.2 billion (about $330 million), and another Ksh10 billion in other
Kenya Airways (KQ) net operating losses for the year 2020 has nearly tripled to Ksh36.2 billion (about $330 million), and another Ksh10 billion in other comprehensive losses, the worst ever in the history of the airline, on account of Covid-19 disruptions that led to a sharp decline in passenger numbers. The loss, for the financial year ended December 2020, is 2.8 times more than the Ksh12.98 billion ($118 million) net loss it had posted a year earlier, and now deals a major blow to the recovery efforts of the national carrier. The huge accumulated losses have seen KQs negative equity position worsen from Ksh17.89 billion ($163 million) a year earlier to Ksh64.2 billion ($585 million), meaning that it is technically insolvent. According to financial analysts, some of the inefficiencies in the company can be attributed to political interference. Despite the technical insolvency, many stakeholders believe that the government cannot allow the company to collapse.
Required
a) Discuss the items classified as other comprehensive income clearly indicating the provision of the applicable accounting standards
b) Using positive accounting theory, discuss the different hypothesis that may be used to argue the performance of the company
c) Some of the losses recognised in the financial statements of the company are as result of fair value measurement estimates discuss
d) There are stakeholders who believe the government cannot allow the company to collapse, using the statement discuss the following theories
i. Conspiracy theory
ii. Agency theory
iii. Political theory
e) KQ is technically insolvent but still a going concern. Discuss
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