The following is the draft trading and income statement of Parnell Ltd for the year ending 31 December 2003:

You are given the following additional information, which is reflected in the above statement of comprehensive income only to the extent stated:
1. Distribution costs include a bad debt of $15 million which arose on the insolvency of a major customer. There is no prospect of recovering any of this debt. Bad debts have never been material in the past.
2. The company has traditionally consisted of a manufacturing division and a distribution division. On 31 December 2003, the entire distribution division was sold for $50 million; its book value at the time of sale was $40 million. The profit on disposal was credited to administrative expenses. (Ignore any related income tax.)
3. During 2003, the distribution division made sales of $100 million and had a cost of sales of $30 million. There will be no reduction in stated distribution costs or administration expenses as a result of this disposal.
4. The company owns offices which it purchased on 1 January 2001 for $500 million, comprising $200 million for land and $300 million for buildings. No depreciation was charged in 2001 or 2002, but the company now considers that such a charge should be introduced. The buildings were expected to have a life of 50 years at the date of purchase, and the company uses the straight-line basis for calculating depreciation, assuming a zero residual value. No taxation consequences result from this change.
5. During 2003, par t of the manufacturing division was restructured at a cost of $20 million to take advantage of modern production techniques. The restructuring was not fundamental and will not have a material effect on the nature and focus of the company€™s operations. This cost is included under administration expenses in the statement of comprehensive income.

Required:
(a) State how each of the items 1€“5 above must be accounted for in order to comply with the requirements of international accounting standards.
(b) Redraft the income statement of Parnell Ltd for 2003, taking into account the additional information so as to comply, as far as possible, with relevant standard accounting practice. Show clearly any adjustments you make. Notes to the accounts are not required. Where an IAS recommends information to be on the face of the income statement it could be recorded on the face of thestatement.

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$m $m 563 310 253 Revenue Cost of sales Distribution costs Administrative expenses 45 78 Profit on ordinary activities before tax Tax on profit on ordinary activities Profit on ordinary activities after taxation - all retained Profit brought forward at I January 2003 Profit carried forward at 31 December 2003 123 130 45 85 101 186