You are the Management Accountant of Drax. The entity prepares financial statements to 31 March each year. Earnings per share is regarded as a key performance indicator and the executive directors receive a bonus if the earnings per share exceeds a given target figure. Good corporate governance is ensured by the appointment of a number of non-executive directors, who rigorously scrutinize the financial statements each year to ensure that the earnings per share figure has been correctly computed.
Drax has recently appointed a new non-executive director who seeks your advice regarding the financial statements for the year ended 31 March 2003. Extracts from these financial statements (excluding the comparative figures) are given below. The financial statements comply with relevant Accounting Standards in all material respects.

NOTES TO THE FINANCIAL STATEMENTS:
Note 1
During the year Drax disposed of a subsidiary. The loss on disposal shown in the income statement consists of two elements:

Disposal proceeds less related net assets less related goodwill ...... $45 million loss
Gain on curtailment of retirement benefits relating to disposal......$15 million profit.
Note 2
At the start of the period, Drax had 120 million $1 equity shares in issue. Drax had no nonequity shares. On 1 July 2002, Drax made a rights issue to existing shareholders of one share for every four held at $2 per share. The market value of each share immediately before the rights issue was $2.50.
Note 3
Defined benefit pension plan

The new non-executive director has sent you a list of questions to which he required answers:
(a) Please show how the earnings per share figure has been computed.
(b) I am a non-executive director for another entity operating in the same industry as Drax with roughly the same revenue and with very similar unit costs of raw materials. The nominal value of the shares of this other entity is $1 yet its earnings per share is quite different from that of Drax. How can this be?
(c) I am very suspicious about some of the figures in the statement of changes in equity and in the pension plan liability. It would seem to me that exchange losses on loans and actuarial losses relating to the pension plan should be in the income statement. Are the executive directors trying to maximize the earnings per share for their own ends?
(d) I don't understand how the 'gain on curtailment of retirement benefits' is a gain that goes to the income statement. Shouldn't it be treated in the same way as the actuarial losses that seem to be included in the balance sheet figure for the pension plan liability?
Required:
Prepare a reply to the questions the non-executive director has raised. You should refer to the provisions of relevant Accounting Standards where appropriate. Assume that the nonexecutive director has a reasonable general knowledge of business but that he is not familiar with the detail of Accounting Standards.

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STATEMENTS OF FINANCIAL PERFORMANCE Income statement-year ended 31 March 2003 Continuing Discontinuing operations oprations Revenue Cost of sales Gross proft Other operating oxponses Profit from operation Loss on disposal cf discontinuing operations S million 1 000 (520) 490 (200) milion 100 (70) 30 Total S milition 1 100 (590) 510 (240 (10) Note Profit before finance costs Finance costs Profit before tax Ircome tax expense Profit after tax Minority interests Group profit for the period Earnings per equity share 59.13 cents (30) (a0) (30) 240 (55) 185 (55) 130 (45) 85 280 Statement of changes in equity-year ended 31 March 2003 5 million 270 85 miltion Balance at 1 April 2002 Profit for the financial yea Untealized surplus on the revaiuation of properties Currency translation ditterencos on foroign currency net investments Less exchange losses on related foreign currency loans Dividends (all equity) Issue of share capital (Note 2 12 (50) 60 Balance at 31 March 2003 Present value of funded obligations Fair value of plan assets Unrecognized actuarial losses Net liability in balance sheet At 31 March 2003 $ milion 5 00 (2 600) (380 2 020 At 31 March 2002 S million 500 (2 700) (350) 1 450