Question MOYES

(a) (i) Draft an explanatory note to the directors of Moyes which should include:
 A calculation of cash generated from operations using the indirect method; and
 An explanation of the specific adjustments required to the group profit before tax to calculate
the cash generated from operations. Note. Any workings can either be shown in the main body
of the explanatory note or in an appendix to the explanatory note. (12 marks)

$
Net profit before tax 209

Adjustments:
Share of profit of associates (67)
Service component 24
Contribution into the pension scheme (15)
Impairment of goodwill 10
Depreciation 99
Impairment ($43- $20) 23
Loss on inventory 6

Operating profit before working capital changes

Inventories
Trade Receivables
Trade Payables
Cash generated from operation
Interest
Tax
Net cash

Working capital changes

Inventories Trade Receivables Trade payables

opening 165 149 197
Loss in inv (6)

Closing 126 156 215

Service component
Remeasurement-OCI-does not affect operating profit
 Benefits paid out Dr PV of PL Cr FV of Plan Assets
Contributions Dr FV of plan Assets Cr Cash-operation-operating activities
Impairment of GW

PPE
Cash addition: IA
Depreciation: OA
Impairment :$43 where $20 Revaluation

Inventory

$million Dinar
Opening 16 $1: 5 80
30 sept 20X8 10 $1: 6 60
Loss on inventory 6

(b) (ii) Explain how the changes to the group structure and dividend would impact upon the
consolidated statement of cash flows at 30 September 20X8 for the Moyes group. You should
not attempt to alter your answer to Part (a). (6 marks)

(iii) Advise the directors as to whether Watson should be classified as held for sale and whether
both it and Barham should be classified as discontinued operations. (6 marks)