This section provides a summary of significant accounting policies, significant accounting judgements, estimates and assumptions used,
other general accounting policies and Sri Lanka Accounting Standards (SLFRS) not yet adopted.
All specific accounting policies and accounting estimates in relation to the reported values
have been presented in the respective
notes in section 4.
The Consolidated Financial Statements of the Group and the separate Financial Statements of the Company, have been prepared and presented in accordance with the Sri Lanka Accounting Standards (SLFRSs/LKASs) laid down by The Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No. 07 of 2007.
The Board of Directors acknowledges the responsibility in relation to the Financial Statements, as set out in the ‘Statement of Directors’ Responsibilities for Financial Statements’, ‘Annual Report of the Board of Directors’ and in the statement appearing with the Statement of Financial Position.
The Financial Statements of the Group/Company have been prepared on historical cost basis, except for freehold land and financial assets available for sale measured at fair value and defined benefit obligations which is recognised at present value.
The Financial Statements of the Group / Company are presented in Sri Lankan Rupees, which is the Group’s functional currency.
Each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial.
Assets and liabilities and income and expenses are not set off unless permitted by Sri Lanka Accounting Standards.
The amounts in the Financial Statements have been rounded off to the nearest Rupees thousand, except where otherwise indicated.
The accounting policies set out in each of the individual notes to the Financial Statements of the Group/Company, have been applied consistently to all periods presented in these Financial Statements.
Management considers the accounting policies relating to revenue recognition to be significant accounting policies. These policies are presented in more details in note 4.1.
In addition, the accounting policies relating to the following are considered relevant to understanding these Consolidated Financial Statements.
- Property, plant and equipment
- Financial assets and liabilities
- Inventories
- Trade and other receivables
The preparation of Financial Statements in conformity with SLFRSs/LKASs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence, actual experience and results may differ from these judgments and estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised prospectively.
Management considered the following items, where significant judgments, estimates and assumptions have been used in preparing these Financial Statements.
Going concern
The management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Group’s/Company’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on a going concern basis.
The following notes provide more information on specific accounting judgments, estimations and assumptions used.
- Impairment losses on non financial assets (Note 3.9)
Management Judgement is used when assessing the indicators of impairment.
- Deferred tax (Note 4.23)
- Provision for impairment of trade receivables (Note 4.16)
- Defined benefit obligation (Note 4.22)
- Provision for impairment of investments in subsidiaries
(Note 4.12.1)
- Provision and contingent liabilities (Note 4.25)
Sri Lanka Accounting Standards (SLFRSs) issued but not yet effective.
The new accounting standards, amendments and interpretations issued but not effective for the financial year commencing 1 April 2013 have not been applied when preparing these Financial Statements.
SLFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. SLFRS 9 replaces the parts of LKAS 39 that relate to classification and measurement of financial instruments. SLFRS 9, requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the LKAS 39 requirements. The effective date of this standard has been deferred.
SLFRS 10, ‘Consolidated financial statements’, builds on existing principles by identifying the concept of control as the determining factor when assessing whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where it is difficult to assess. This standard will not have significant impact on the Group and it has been adopted from the accounting period commencing from 1 April 2014.
SLFRS 11, ‘Joint Arrangement’, The objective of this SLFRS is to establish principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (i.e. joint arrangements). SLFRS 11 has become effective for the Group from 1 April 2014. However, it will not be applicable for the Group, in the absence of a joint venture in the Group this standard become in applicable.
SLFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. This standard will not have a significant impact on the Group and has become effective from the accounting period commencing on 1 April 2014.
SLFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across SLFRSs/LKASs. This standard has become effective to the Group from 1 April 2014 and Group dose not anticipate any significant impact.
There are no other standards interpretations that are issued but not effective as at the reporting date.
Subsidiaries
Subsidiaries are those entities controlled by the Company. Control exists where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are also taken into account. All the subsidiaries are consolidated from the date that control commences until the date that control ceases.
A list of the Group’s subsidiaries is set out in Note 4.12 to the Financial Statements.
Financial Statements of the Group entities are prepared to a common financial year ending 31st March, using uniform accounting policies.
There are no restrictions on the ability of subsidiaries to transfer funds to the Company (The Parent) in the form of cash dividend or repayment of loans and advances.
Transactions eliminated on consolidation
Intra-group balances and transactions, income and expenses and any unrealised gains arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements. Unrealised losses are also eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group/Group entities at the functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the spot rate of the functional currency prevailing at the reporting date. Foreign exchange differences arising on translation of foreign exchange transactions are recognised as a profit or a loss in the Income Statement.
All non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
