The following financial statement extracts relate to the Hessian Group: Extracts from statement of financial position as at 30 April 20X6 (with comparatives) 20x6 2005 $m Non-current assets Goodwill $m 136 127 Current assets Inventories Trade and other receivables 167 156 219197 Current liabilities Trade and other payables 140 100 Extract from statement of profit or loss for the year ended 30 April 20X6 $m Gross profit 966 Operating expenses (751) Finance costs (5) Profit before tax 210 The following information is relevant to the Hessian group: (i) Depreciation charged on property, plant and equipment for the year ended 30 April 20X6 was $196 million. (ii) On 1 May 20X5, the Hessian group acquired 70% of the shares in Natural. Consideration for the share purchase was in two forms: cash of $80 million an intangible asset with a fair value of $6 million and a carrying amount of $4 million. Hessian measured the non-controlling interest in Natural at its fair value of $40 million at the acquisition date. The fair value of Natural's identifiable net assets at the acquisition date was $110 million. This included the following $m Inventories 15 Trade and other payables Goodwill impairments have been recorded in the year, but do not relate to Natural. (iii) Hessian has a defined benefit pension scheme, presented in non-current liabilities. The year-on-year movement comprises the following $m Net obligation at 30 April 20X5 Net interest cost Current service cost Contributions to scheme Re-measurement loss Net obligation at 30 April 20X6 The benefits paid in the period by the trustees of the scheme were $4 million. The net interest cost has been charged to finance costs. The current service cost has been charged to operating expenses. Required: (a) Using the indirect method calculate 'cash generated from operations' as it would appear in the consolidated statement of cash flows for the year ended 30 April 20X6. Explain the reasoning behind the adjustments that you make to profit. (50 marks) (b) Discuss the extent to which the indirect method of reporting cash flows from operating activities is more useful and informative to users of financial statements than the direct method. (20 marks) The following financial statement extracts relate to the Hessian Group: Extracts from statement of financial position as at 30 April 20X6 (with comparatives) 20x6 2005 $m Non-current assets Goodwill $m 136 127 Current assets Inventories Trade and other receivables 167 156 219197 Current liabilities Trade and other payables 140 100 Extract from statement of profit or loss for the year ended 30 April 20X6 $m Gross profit 966 Operating expenses (751) Finance costs (5) Profit before tax 210 The following information is relevant to the Hessian group: (i) Depreciation charged on property, plant and equipment for the year ended 30 April 20X6 was $196 million. (ii) On 1 May 20X5, the Hessian group acquired 70% of the shares in Natural. Consideration for the share purchase was in two forms: cash of $80 million an intangible asset with a fair value of $6 million and a carrying amount of $4 million. Hessian measured the non-controlling interest in Natural at its fair value of $40 million at the acquisition date. The fair value of Natural's identifiable net assets at the acquisition date was $110 million. This included the following $m Inventories 15 Trade and other payables Goodwill impairments have been recorded in the year, but do not relate to Natural. (iii) Hessian has a defined benefit pension scheme, presented in non-current liabilities. The year-on-year movement comprises the following $m Net obligation at 30 April 20X5 Net interest cost Current service cost Contributions to scheme Re-measurement loss Net obligation at 30 April 20X6 The benefits paid in the period by the trustees of the scheme were $4 million. The net interest cost has been charged to finance costs. The current service cost has been charged to operating expenses. Required: (a) Using the indirect method calculate 'cash generated from operations' as it would appear in the consolidated statement of cash flows for the year ended 30 April 20X6. Explain the reasoning behind the adjustments that you make to profit. (50 marks) (b) Discuss the extent to which the indirect method of reporting cash flows from operating activities is more useful and informative to users of financial statements than the direct method. (20 marks)