BBS STORE JUNE/06 (BUSINESS RESTRUCTURING)

Yes, with the share buy-back amount. but I meant adjustments to earnings like property rent foregone and return on reinvested funds. They impact earnings for the year, so why aren't reflected in the R/E amount?

But 20X8 has already happened. It is only the changes at the year end that will have any impact on the SOFP for 20X8.. When it comes to the future earnings per share then there will be an impact in the future and there the return on the reinvested funds has been dealt with in the answer.

Dear Sir, I think share buy-back happen at the end or 20X8 --> impact on RE of 20X8 also. Why do we exclude of comparative SOFP of 20X8? - And also, in calculating comparative EPS of 20X8, why do we take into account interest saved...that happened in future? Thanks in advance!

I am not sure that I quite follow you. The questions is asking what the effect of the two options will be, and we can only use the 20X8 statement to show the effect (because that is all we have). 20X8 has already finished, but again we can only use 20X8 to illustrate the effect. The share buy-back is only with option 2, and an adjustment has been made to retained earnings. Interest would not be saved in 20X8 - only in the future. But again, because we only have the information for 20X8, we are using those statements in order to illustrate what the effect would have been.

- About RE of SOFP of 20X8: I've looked back the answer, they already included in RE:)). Thank you so much! - But with EPS, I still confused: why do we include interest saved of coming years... in comparative earning, because impact in earning --> impact in RE. But in RE we exclude these.

I am please you are happy with the first point :-) With regard to the second point, I now understand you and I suppose that you could have taken the interest into account in the comparative SOFP's (and would still have got the marks). The examiner chose to look at the two things separately.

Mr.Moffat, why did we take the 6800 equity value as the total value? Why didnt we take the the sum of the market values of equity 6800 & debt 1130?

It is a moot point and this question was set by the previous examiner. He was assuming that it was equity that bore the risk and therefore used equity for combining the betas.

Hi John, when calculating the eps, why is 770m *0.65*0.3 done (when we should take only the 360m impact) ? Why is Roe calculated?

Why only the 360M impact? There is a reduction of the credit spread for the 770M (and the saving is calculated net of tax at 35%). There is no need to calculate the ROE because it was not required in the question :-)