Answer Question 1 (a) The main objectives of revising and replacing IASs and SICs The International Accounting

Standards Board developed this revised IAS 16 as part of its project on Improvements to International Accounting Standards. The project was undertaken in the light of queries and criticisms raised in relation to the Standards ! securities regulators" professional accountants and other interested parties. The o jectives of the project were to reduce or eliminate alternatives" redundancies and conflicts within the Standards" to deal with some convergence issues and to make other improvements. #or IAS 16 the Board$s main o jective was a limited revision to provide additional guidance and clarification on selected matters. The Board did not reconsider the fundamental approach to the accounting for propert!" plant and equipment contained in IAS 16. (b) Reasons some countries to hold out against International Accounting Standards (i) The standards developed may not be of immediate importance to some other Countries depending on the local environment. (ii) Priority of development of standards may not be right. IASB will follow their own programme whereas other Country may be in an urgent need of specific standard which falls later on the programme.The requirements of various Countries differ. (iii) eveloping Countries impact on their arguments may be negligible.It implies standards will generally be impossible on the developing Countries. (iv) Standards may tend to be general (v) !ay under develop local talents since they will sit bac" for IASB to do the wor" for them

Answer to Question 2(a) Relevance Relevant financial information is capable of making a difference in the decisions made by users. inancial information is capable of making a difference in decisions if it has predictive value! confirmatory value! or both. "he predictive value and confirmatory value of financial information are interrelated. aithful representation #eneral purpose financial reports represent economic phenomena in words and numbers! "o be useful! financial information must not only be relevant! it must also represent faithfully the phenomena it purports to represent. "his fundamental characteristic seeks to ma$imise the underlying characteristics of completeness! neutrality and freedom from error. Information must be both relevant and faithfully represented if it is to be useful.

(b) #i$ Assets probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. (ii) %iabilities probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.!ost liabilities require the future payment of cash& the amount and timing of which are specified by a legally enforceable contract. Actually& though& a liability need not be payable in cash. Instead& it may require the company to transfer other assets or to provide services (iii) 'quity used when an investor can(t control& but can significantly influence& the investee. or net assets& called shareholders) equity called shareholders( equity or stoc"holders( equity for a corporation* the residual interest in the assets of an entity that remains after deducting liabilities. or stoc"holders) equity called shareholders( equity or stoc"holders( equity for a corporation* the residual interest in the assets of an entity that remains after deducting liabilities. for a corporation& is the residual interest in the assets of an entity that remains after deducting liabilities. Assets and liabilities are measured directly* equity is not. 'quity is simply a residual amount.

(iv) '+penses outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing good& rendering services& or other activities that constitute the entity(s ongoing ma,or& or central& operations. are outflows or other using up of assets or incurrence)s of liabilities during a period from delivering or producing goods& rendering services& or other activities that constitute the entity)s ongoing ma,or& or central& operations. (v) Revenue traditional net income plus other non owner changes in equity. Is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non owner sources. It includes all changes in equity during a period e+cept those resulting from investments by owners and distributions to owners

Q%&'"()* +, Answers. -'P.-T T./ B.A- .0 I-'CT.-S 0-.!/ I-'CT.- .0 0I1A1C' AT'22222222222 '%-.&/", A*A01'(' ) 2&R )R3A*/& ) "&3-) 0"4 "his report should be read in con5unction showing the relevant ratios bellow

0I1A1CIA% P'-0.-!A1C' -'P.-T T. T3' I-'CT.-S 'T'I%S SI!BA %T 14ATI %T I1 5ST-4. A. %I65I IT4 -ATI.S #i$ Current ratio 7.8 7.9 :.; #ii$ Acid test ratio <.; <.= 7.> (nterpretations. (i) "here is "shs 1.6 and "shs 1.7 in current assets ready to settle each current liability (i.e. 1.6,1 and 1.7,1)."his is below the industry average of "shs 2.8."herefore! "embo 0td cannot meet its short9term obligations as they fall due.

#ii$ Also there is Tshs <.; and Tshs <.= of quic" assets #i.e. cash& mar"etable securities an account receivable$ to settle each shilling of short?term debt #i.e. <.;/7 and <.=/7$.Thus& Tembo %td suffers from lac" of enough liquid resources readily available to meet current obligations as they fall due. B. %'@'-AA' B 'BT -ATI.S. 'TAI%'S SI!BA %T #i$ ebt C 'quity 8<

14ATI %T :<

I1 5ST-4 D;

Interpretations. The Simba %td ratio of 8<E is above the industry average of D;E. This means that the firm)s funds are supplied more by creditors than by the owners. Fhile 1yati %td ratio of :<E is below the industry average of D;E.This means that the firm)s funds are supplied less by creditors than by the owners. /. 2R) ("A-(0("1 RA"()'. 'TAI%'S SI!BA %T I1 5ST-4 :; 7: :< 1et Profit !argin E 77 #iii$ -eturn on equity #-.'$ 78 #I@$ -.C' before Ta+ E ::

14ATI %T #i$ Aross profit ratio E #ii$ ; :: :8 9 7; :<

(nterpretations. (i) 'imba 0td is doing well compared to the industry average (i.e.28: versus 2;)! indicating that sales are high or the cost of inventories are relatively low. <hile! *yati is doing badly if compared to the industry average (i.e. 12: versus 2;:)! indicating that sales are low or cost of inventories are relatively high. (ii) 'imba 0td has reached higher profit margin as compared to the industry average (i.e. 11: versus 7:)! indicating that it is paying less interest and ta$es. -ut *yati has reached lower profit margin as compared to the industry average (i.e. 8: versus 7:)! indicating that it is paying more interest and ta$es.

(iii) -oth companies have higher return on shareholders= investment compared to the industry average of 18:. (iv) -oth companies have improved considerably 'imba 0td and *yati 0td and now is high than the industry average of 2;:. 4. A/"(>("1? & 4&"A(0' (*4%'"R1 (/(&*/1 RA"()'. '(3-A 0td *1A"( 0td (i) "otal Assets "urnover 1.8 @.; 2.8 (ii) i$ed Assets "urnover 2.+ 12 8.1 (iii) 4ebtors /ollection 2eriod 6.; 8.1 A.8 (iv) 'tock Bolding in weeks 21.; @.; 1+.; (nterpretations. (i) 'imba 0td are lowery utiliCed to its capacity in generating sales compared to the industry! while *yati 0td are highly utiliCed to its capacity in generating sales. (f compared to the industry average! the *yati 0td is well above it (i.e. @.; versus 2.8). #ii$ 1yati %td is using to the high capacity its fi+ed assets in generating its income as compared to the industry average of only #i.e. 7: versus ;.7times$& while Simba %td is using to the low capacity its fi+ed assets in generating its income as compared to the industry average of ;.7 times. #iii$ 1yati %td is more efficient in collecting receivables. It ta"es ;.7 days as compared to the industry average of D.7& while Simba %td is lower efficient in collecting receivables. It ta"es 8days compared to the industry average of D.7 . #iv$ Simba %td is more effective in selling goods than 1yati %td. This is because its inventory turnover of :7.< times as above the industry average of 7>.< times& but 1yati ta"es G.< times which is below the industry averages (b) R&/)33&*4A"()*' #i$ %I65I IT4 -ATI.S

(n general terms! the "&3-) ltd ratios if compared to the industrial averages are well below them. "his may be due to the siCe of the company."herefore!it is recommended that even though the company can meet its short term obligations! it should put more emphasis on not keeping too much inventories! because they have low or Cero returns. "his has been revealed in the Acidic test ratio. (t is thus recommended that the company should work hard to dispose all the inventories! which are idle! so as to realiHe cash that will help to meet short term obligations. #ii$ %'@'-AA' -ATI.S Long term debts for Simba ltd is almost twice to the owners equity, which means that the owners return are highly reduced due to higher interest payments. It is thus, recommended that Simba ltd should take efforts to reduce its depts. Because if more debts are taken they will lead to higher interest rate. While yati ltd is !ice !ersa. "iii#2R) ("A-(0("1 RA"()' $he company is not doing well in the side of operating and net profits. It is recommended that the company should reduce sum operating costs, which are not necessary. for e%ample, Interest e%penses can be reduced by reducing debts. $he company is also affected by ta%es, but this is outside the ability of the management to control. "i!# A/"(>("1 RA"()'
Both companies have a half performance to their ratios compared to the industrial average. It is recommended that TEMBO ltd should have to continue to aim in perfoming higher than the present situation.