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Hi Sir, for this question we need to find the adjusted earnings in (part a). May I know why does all the adjustments that we make will not affect the current retained earnings?
The current retained earnings have happened and are a fact.
What we are trying to show is what the effect will be if we do unbundle.if we adjust the PAT we should have a increase in profits hence retained earnings will increased too. sometimes im confused. can explain. so does it mean that as long as is unbundling qns the retained earnings wont be affected but this qns the share premium is deducted from RE.
Sorry – it is probably me who is being stupid – but I am a bit confused by your question. We are calculating the immediate effect there will be on the SOFP and so adjusting the PAT is not relevant.
We need to adjust the PAT as qns state that we need to calculate the earnings per share. my question is how come we calculate the adjusted earnings, this earnings will not affect the SOFP retained earnings?
Ahh, now I understand your confusion (sorry if I sounded stupid before!)
The point is that the actual 2008 figures themselves will not change – they report what has happened. What we are looking at is what will happen in the future under the two options.
The minute the unbundling happens, the SOFP will change immediately (as per the answer). The retained earnings will not change immediately, but they will change in the future. So the retained earnings in the SOFP immediately after the unbundling will stay the same.
When we come to the EPS we are looking really at what will happen next year i.e. after the unbundling. Next year it will affect the PAT (and therefore the retained earnings next year), but the SOFP we are preparing is not the SOFP in a years time, but the SOFP immediately we unbundle.
ok thanks a lot Sir.
I have some confusion between the meaning of coporate restructuring and Reconstruction? Are they the same.
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